OPEC recently agreed on a new production target of 32.5 million bbl/day in order to accelerate the ongoing drawdown of the stock overhang and to help rebalance the oil market going forward. The decision was made at the 171st Meeting of the Conference of OPEC countries in Vienna, Austria on 30 November.
The conference studied the Secretary General’s report, the report and recommendations made by the High-Level Committee that was set up following the Algiers Accord that was agreed at the 170th meeting of the OPEC Conference on 28 September in Algeria, the report of the Economic Commission Board, OPEC’s Long-Term Strategy (LTS) document, as well as various administrative matters.
The conference took note of oil market developments since it last met in Algeria and reviewed the oil market outlook for the remainder of 2016 and 2017. It observed that global economic growth forecasts were reasonable for both 2016 and 2017, at 2.9% and 3.1% respectively, that non-OPEC supply is expected to contract by 0.8 million bbl/day (million bbl/day) in 2016, before returning to growth of 0.3 million bbl/day in 2017, and that world oil demand is anticipated to grow at healthy levels of around 1.2 million bbl/day in both 2016 and 2017.
The numbers underscore that the market rebalancing is underway, but the conference stressed that OECD and non-OECD inventories still stand well above the five-year average. The conference said it was vital that stock levels were drawn down to normal levels. The conference also noted the drop off in investment levels in both 2015 and 2016, as well as the huge layoffs the industry has witnessed in recent years. It emphasized the importance of continued investments for an industry that needs regular and predictable investments to provide the necessary supply in the medium- and longer-terms.
The conference recorded its deep appreciation to the commitment and valued contribution of the High-level Committee on the implementation of the Algiers Accord. The committee’s efforts helped form a consensus among member countries on the basis of a proposal put forward by Algeria to implement a new range of targeted production levels.
Accordingly, and in line with the Algiers Accord, the conference decided to implement a new OPEC-14 production target of 32.5million bbl/day. The agreement will be effective 1 January 2017. The Conference also decided to establish a High-level Monitoring Committee, consisting of oil ministers, and assisted by the OPEC Secretariat, to monitor the implementation of the agreement. Member countries, in agreeing to this decision, confirmed their commitment to a stable and balanced oil market, with prices at levels that are suitable for both producers and consumers.
In line with recommendations from the High-level Committee of the Algiers Accord, the conference also agreed to institutionalize a framework for cooperation between OPEC and non-OPEC producing countries on a regular and sustainable basis.