When the Vienna agreement was signed last year, skeptics were sure that the deal will start to break apart before it shows any significant improvement in oil prices. Looking at the current scenario, it looks even more possible. The OPEC is doing a limbo over output production and the fact that oil prices have failed to increase to pre-2014 levels signifies a major change in the oil industry- it is no longer under OPEC’s control and the sooner these countries realize this, the better it would be for them.
OPEC Doubts Still Linger
Last week, the OPEC nations released data related to crude oil output cuts. In February, the Saudi Arabian production has increased and the US crude oil is also on the rise. Consequently, the prices were under strain which led to a losing streak. Oil prices have refused to budge an inch from the $50 mark and do not seem to be moving beyond it in the near future as well. It is important to note that Saudi Arabia made the biggest production cuts amongst participating nations of the Vienna agreement but it also seemed to throw the production cuts to a toss and increase production nonetheless.
The Numbers Speak
In January, when the Vienna agreement came into force, it looked as if OPEC and 13 other participating nations will finally get back on track by reducing oil production and sending 1.8 million fewer barrels of oil per day to the market. With February numbers in consideration, the initial enthusiasm has died off. Secondary sources suggest that the OPEC members produced 31.96 million barrels of crude oil each day, far below the 32.5 million barrels per day benchmark set by the Vienna agreement.
Per these secondary sources, OPEC nations reduced production by 140,000 barrels per day and Saudi Arabia alone cut production by 68,100 barrels per day. It now produces only 9.797 million barrels in a day. However, the Saudi Arabian data provided to OPEC shows a different story. A month ago, Saudis were producing 9.748 million barrels of oil in a day and now they are producing 10.011 million barrels, beating the cause for output reduction.
Whether the agreement will be in force after the first half of the year is over is still a matter of discussion. Ministers will be meeting in Kuwait over the weekend to decide if the deal should be continued or not. US oil drillers and opening of the Libyan ports are major reasons why oil prices are not going up as OPEC wants. Therefore, it could be likely that the deal continues. How much will the nations follow it is a matter of debate as history doesn’t support coordination between these nations.