Caracas, December 1st 2016 (venezuelanalysis.com) – The Organization of Oil Producing Countries (OPEC) has reached a much anticipated deal to cut production to 32.5 million barrels of oil a day across member states following months of negotiations.
The organisation culminated its 171st Ministerial Conference in Vienna on Wednesday, confirming that it would slash oil output by 1.2 million barrels per day as of January 1st 2017. The deal is the consolidation of a previous commitment to decrease production agreed upon at the end of September in an extraordinary meeting in Algeria. This is the first coordinated oil output reduction to be agreed by the 14 member organisation since 2008. Non-member Russia will also participate in the reduction, decreasing its output by 300,000 barrels a day.
The news was met with elation by the ruling socialist party in Venezuela, which has been pushing to curtail production at the heart of the organisation for the past two years. Since 2014 the country has been plunged into economic turmoil due to plummeting global oil prices.
On his Twitter account Wednesday, Venezuelan Oil Minister called the latest deal “historic” and hailed it as “another achievement” of the Bolivarian Revolution.
“We just sealed a historic deal in #OPEC in line with a preliminary pact reached in Algeria, we completed what was planned!!” said the minister, adding that the Venezuelan President Nicolas Maduro had “never given up on the defence of oil prices”.
Since the Chavista government came to power in 1999 under the leadership of former president Hugo Chavez, it has attempted to reinvigorate OPEC and use its political influence at the organisation to push for higher global oil prices for the benefit of petroleum exporting countries.
In 2014, OPEC adopted a pump at will policy opting to let the market set the price of oil at the behest of US ally Saudi Arabia, causing global oil prices to tumble by more than 50%. The Arab state had initially resisted attempts to curtail its production from within the organisation, but was eventually brought into the fold in Vienna in spite of predictions that it would attempt to stymie the deal.
According to an official OPEC communique, the organisation will now “establish a High-level Monitoring Committee, consisting of Oil Ministers, and assisted by the OPEC Secretariat, to monitor the implementation of the Agreement”.
Although global oil prices have soared since the deal was first announced, several analysts have predicted that the US will likely respond to the manoeuvre by increasing its own production of shale oil.
“Higher prices, however, are likely to cause more U.S. shale producers to increase production,” writes the Wall Street Journal.
OPEC is scheduled to hold talks with non-OPEC oil producers on December 9th, when the organisation hopes that other non-member states will join the agreement.
The organisation will review the production cap in May 2017.