The world may see even larger oil production cuts as we move forward into 2017. OPEC (Organization of Petroleum Exporting Countries) has already dramatically reduced production in compliance with their initial production cut agreement. However, further production cuts may be on the horizon for both OPEC members and non-member nations.
OPEC’s Secretary General, Mohammad Barkindo told reporters on Thursday that they are looking into the possibility of accelerating a timetable for lower oil production. This could have a dramatic impact on reserves around the world and help strengthen commodity prices.
“We have our target in accelerating those drawdowns to bring them closer to the five-year level” Barkindo said. (http://bit.ly/2j4GvFD) He also added that markets have already reacted positively to the organization’s commitment to cut oil output following their agreement in November. The hope is that additional production cuts will only add to these gains.
Saudi Arabia has already reduced oil production to less than 10 million barrels a day. This figure is actually below its targeted goal, the nation is now producing oil at a 22-month low. The initial agreement was to cut 486,000 barrels a day to 10.058 million barrels in total.
“Oil production now is below 10 million so far, – So, we’re going the extra mile to lead our colleagues within and outside of OPEC to make sure that the market sees that there’s serious action in place.” said Energy Minister Khalid Al-Falih. (http://bloom.bg/2j3JVbP)
Not All Producers Are On Board
Not all are convinced that the actions by OPEC will be the saving grace of the oil market. Inventories outside of OPEC and the non-member countries that agreed to production cuts have been increasing. As oil trends up and becomes more profitable once again, countries not bound by the agreement are taking advantage of the higher prices.
The Energy Information Administration reported a build of 4.1 million barrels of crude oil inventories when compared to the previous week. This was well above what analysts had expected to see from the EIA report. Initial estimates were to see a build of 930,000 barrels after last week when the agency reported a weekly dramatic decrease in US inventories.
Oil prices have been on the rise, but it may be short lived. The future is still murky when it comes to the oil market. As of now, it seems as though OPEC is working vigorously to return some kind of stability to the market. If outside producers continue increasing inventories and taking full advantage of the recent gains, the market may see supply once again outpace demand.
2017 will absolutely be an interesting year for the oil market. Manufacturers are waiting to see if these gains stay constant as it could prove to be a valuable boost to their industry. A healthy oil industry plays a vital role in bolstering the manufacturing sector. Only time will tell if manufacturers will be able to benefit from these new developments.
Check back soon for the latest updates and news surrounding the oil market and its impact on manufacturing.