The November 2016 OPEC agreement marked a historic turning point for the global oil market. After months of negotiations, members of the Organization of Petroleum Exporting Countries (OPEC) agreed to cut production by 1.2 million barrels per day, with non-OPEC members pledging an additional 600,000 barrels per day in cuts. The move was designed to reduce the global glut of oil that had been dragging down prices since 2014.
The decision to cut production was not an easy one for OPEC. The cartel had been pumping at record levels in an effort to maintain market share, despite the fact that oil prices had fallen by more than 70% since mid-2014. Saudi Arabia, the de facto leader of the group, had been reluctant to cut production, fearing that it would lose market share to its rivals, particularly Iran.
However, as oil prices continued to hover around $50 a barrel, it became increasingly clear that something needed to be done. The glut of oil was not only hurting OPEC members` economies, but it was also affecting the global oil industry as a whole. Companies were cutting back on exploration and production, resulting in job losses and a slowdown in the global economy.
The November agreement was a historic moment for OPEC, as it was the first time in eight years that the cartel had agreed to cut production. The move was also significant because it included non-OPEC members such as Russia, which had not participated in previous OPEC agreements. The inclusion of Russia was seen as a major coup for OPEC, as it gave the cartel more leverage in the global oil market.
The impact of the November agreement was almost immediate. Oil prices surged by more than 10%, and continued to rise over the next few months. By the end of the year, Brent crude was trading above $55 a barrel, up from a low of $27 a barrel in January 2016.
The success of the November agreement also prompted OPEC to extend the production cuts through March 2018. The decision was made in May 2017, and included an additional 1.2 million barrels per day in cuts. Non-OPEC members, including Russia, pledged to continue their cuts as well.
The impact of the November 2016 OPEC agreement is still being felt in the global oil market today. While prices have not returned to the highs of the early 2010s, they have stabilized at a level that is more sustainable for both OPEC members and the global oil industry as a whole. The agreement was a bold move for OPEC, and one that has paid off in a big way.