As output cuts fail to materialize, OPEC fears a prolonged period of market instability

As output cuts fail to materialize, OPEC fears a prolonged period of market instability

Emilio Fabio Torsello
Share
Oil producing countries report record output of crude, to the point that the Algiers agreement itself will have to be revised to include an additional 340,000 bpd in cuts

"Failure to jointly act with our non-OPEC colleagues and friends in accordance with the Algiers accord will further elongate this period of very low growth, this period of instability in the market, and will put forward, further, the re-balancing process," stated Mohammed Barkindo, secretary general of OPEC. His remarks were partly in reference to Russia, which he claims is "on board" for an output freeze deal, stating that "Top Russian officials have confirmed that Moscow will also join this agreement." However, last month Russia’s oil production hit a record high, adding another 500,000 bpd to its crude output, while OPEC members have collectively reached a record 33.5 million bpd. Nigeria and Libya alone have injected an additional 500,000 bpd of crude oil into the market. This situation has caused the price of oil to drop 13% in the run-up to the US election, the result of which then provoked a further drop of 3.7%, eliminating any trace of the rallying following the announcement of the preliminary OPEC agreement in Algiers. In light of this recent rise in output, analysts believe that oil producer countries should now cut 340,000 bpd more than that provided for by the Algiers agreement.