Baku, Azerbaijan, May 18
By Elena Kosolapova – Trend:
The oil producers that signed an agreement to cut production in late 2016 have become “hostages” of that deal, Bogdan Zvarich, an analyst with Russia’s Finam Investment Company, told Trend via email.
In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 barrels per day.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce the output by 558,000 barrels per day starting from Jan. 1, 2017 for six months, extendable for another six months.
“If they [oil producers] do not extend the agreement [at a meeting in late May], this will have a significant negative impact on the energy market – oil prices can drop below $40 per barrel,” Zvarich said.
“Meanwhile, in case the agreement is extended even for nine months, this will only ensure the market’s stability and the further growth of oil production in the countries that did not accede to the agreement,” explained the analyst.