OPEC suffers oil price fall despite production cut agreement

Oil prices fell Friday despite decision of the Organisation of Petroleum Exporting Countries (OPEC) to cut production by 200,000-700,000 barrels per day (bpd).

This is after some gains were recorded on Thursday following resolution to implement modest oil output cuts,the first of such deal since 2008, with Saudi Arabia, the highest OPEC producing country softening its stance on it arch-rival – Iran.

Before the meeting, a lot of pressure was on the two Arab countries to resolve their difference, believed to have largely been responsible for continuous low oil prices in the past five years, reaching its worst levels in 2015 and 2016.

At the much result-anticipated meeting of the group in Algeria on Wednesday, member-countries agreed that the need to cut down production was the only practical wayto stem the sliding price tide of oil price in theinternational market.

Brent crude, the global oil benchmark, fell 0.8 per cent to $48.85 a barrel, while West Texas intermediate futures were trading down 0.5 per cent at $46.85 a barrel…

A special committee working on the modalities for obtaining price stability had briefed the meeting that price would be lower by 25 percent before December, if no urgent measures were taken to check it.

Under the new deal, OPEC would reduce output to a range of 32.5 million bpd to 33 million from the current estimates of 33.24 million bpd.

Concerns have also been raised over how the maintenance of production lines of non-member countries, especially Russia at the expense of the cartel.

But a market analyst, Ms Juan Hobson, of Wall Street journal has argued that the “volume of reduction, between 200,000 and 700,000 barrels per day, is still inadequate to control the supply growth and anticipated return to the era of good business for the industry.”

OPEC members will wait until the next official meeting in November to complete the details, including the quota for individual producers, depending on outcome of more consultations.

By Emma Eke….

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