The Organization of the Petroleum Exporting Countries (OPEC) has agreed to what some news media sources are calling a relatively slight drop in oil production, the first since 2008. OPEC said it opted for a production target of between 32.5 million barrels per day (BBL/d) and 33 million BBL/d, down from the current estimated output of 33.5 million BBL/d.

However, output quotas for each of OPEC’s 14 members would be undecided until its annual meeting November 30, according to Reuters, and some industry observers are questioning whether the agreement will have any real effect, particularly regarding output by Iran and Russia.

Noting that global oil prices have more than halved in the last two years as a result of oversupply, OPEC said it “took into account current market conditions and immediate prospects, and concluded that it is not advisable to ignore the potential risk that the present stock overhang may continue to weigh negatively well into the future, with a worsening impact on producers, consumers and the industry.”

OPEC said world oil demand remains robust, “while the prospects of future supplies are being negatively impacted by deep cuts in investments and massive layoffs.” It cited the “challenge of drawing down the excess stock levels in the coming quarters, [noting] the drop in United States oil inventories seen in recent weeks.”

OPEC also said it would “conduct a serious and constructive dialogue with non-member producing countries, with the objective to stabilize the oil market and avoid the adverse impacts in the short- and medium-term.”

For related information, see September 29, 2016, article - Crude Storage Capacity Rising, Yet Utilization Rates Still Continue to Climb.

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