OPEC non-OPEC agreement
From Algeri to Vienna: the timeline of the cuts in productionAn extension of 9 months, therefore over the initial expiry date envisaged for the end of June. But let's take a brief look back at the process which led to the announcement at the end of May, trying to understand its importance and historical significance but also its possible limits.
It all began on 28 September 2016 in Algiers when, following a huge diplomatic effort, it became evident that OPEC wished to stop its market share defence strategy launched almost two years earlier (27 November 2014). Formalisation came during the 171st OPEC Conference in Vienna, on 30 November 2016, when the Organization announced the implementation of a cumulative cut in production of 1.2 MMbbl/d based on October production levels, to be carried out between 1 January and 30 June 2017.
Ten days later, on 10 December 2016, the official OPEC headquarters in Vienna hosted a joint ministerial meeting in which 11 countries outside the Organization - namely Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, South Sudan - joined the OPEC decision and announced an overall commitment to reducing production by around 0.6 MMbbl/d, half of which incumbent on Russia.
The Declaration of Cooperation reached, for a cumulative cut of 1.8 MMbbl/d, aims to help re-absorption of the supply surplus characterizing the world oil market in an attempt to support prices.
In terms of effectiveness of the agreed cuts, the results achieved so far have been surprising, despite the initial mistrust concerning the discipline of OPEC member countries and actual collaboration of the non-OPEC countries. The official estimates of the OPEC and non-OPEC Joint Monitoring Committee - established with the specific purpose of verifying actual implementation of the reductions - have reported a high overall adherence, from 86% in January to 98% in June, exceeding 100% in some months.
However, this result has been achieved gradually and not uniformly. While it is true that OPEC has exceeded the announced target, month by month, it is also true that the "group" action has not been unitary: some countries have cut more than they should (above all Saudi Arabia), while others have failed to implement the allocated reductions, as in the case of Iraq. The overall performance of the non-OPEC group adhering to the Agreement was not as good with the level of compliance initially lower than the target, although it did improve in April when the cut promised by Russia of 0.3 MMbbl/d was completed.