Oil production cuts above expectations

Oil production cuts above expectations

Elisa Maria Giannetto
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The technical committee meeting in Vienna to monitor cuts in oil production is satisfied with the results of these first few weeks: 1.5 million barrels per day cut

''The agreement has been a success, all countries are meeting their commitments and the results exceed expectations''. Thus, in the first weeks after its signing, Russian Energy Minister Aleksander Novak commented on the agreement achieved between OPEC and non-OPEC members, following the technical encounter that took place in Vienna. Figures speak of a cut of 1.5 million bpd, set against the 1.8 million agreed upon, with the objective of already reaching 1.7 million by the end of the month.The Saudi energy minister Khalid al Falih speaks of ''a great result that confirms the joint commitment by all countries participating in the agreement to reduce output'', and declares himself to be even more confident about the stabilization of oil prices. Despite these first positive results, and the countries’ impending commitment to meet up again to continue to monitor reduction in output, one great uncertainty immediately looms over the coming future: the new American president Donald Trump’s moves in the energy field. The United States in fact are continuing to run against the tide, having inaugurated 29 new drilling rigs in a single week. To date 551 total facilities can be counted, constituting the highest number since November 2015. Oil production in the US has risen by 6% since the middle of 2016, returning to the levels of the end of 2014. And this increase could represent the real brake on price hikes: Brent has already lost 7 cents, reaching 55.42 dollars while WTI, down 11 cents, is trading at 53.11 dollars a barrel. The production cuts agreed upon by countries participating in the OPEC agreement and the weak dollar have partially limited the drop in prices, but the policy that Trump intends implementing still poses many unresolved questions. As Reuters analysts explained, the higher the oil prices, the greater the incentivation to proceed with the drilling. ''On the technical front - experts explain - Brent could reach 56.55 dollars a barrel'' and, faced with this kind of scenario, America is unlikely to want to backtrack.