All 24 of the Organisation of the Petroleum Exporting Countries (OPEC) agreed in Vienna, on 10 December 2016, to reduce oil outputs starting 1 January 2017. Mohammad Barkindo, Secretary-General of OPEC, claimed members are making “tremendous efforts to do as they pledged” and that current oil prices remain “far away from the equilibrium price”.
The deal, set to last for an initial term of six months, is unlikely to be extended according to Saudi Energy Minister Khalid Al-Falih, “because the cuts, coupled with rising demand, can clear the global surplus by mid year”. However, Mr. Barkindo has said, OPEC will wait for its ministerial meeting on 25 May to decide on an extension or not. To combat a three-year oil surplus, affecting prices and damaging energy-dependent economies, OPEC is also cooperating with other nations.
OPEC may, however, encounter negative circumstances from a significant drop in world oil demand. Head of Iraq’s State Oil Marketing Organisation, Falah Alamri stated, “[o]il prices may continue the same current trends for a few months then in the last months of the year may take a different rend, if demand growth slows and supply remains stable or increases”. However, Mr. Almari, also stated three weeks into OPEC’s first agreement to cut production in nine years, that it is “so far, so good”. “OPEC let the market work and so far they are succeeding, because its affected investment”, Mr. Alamri told Reuters.