“Is OPEC+ Living up to its Oil Cutting Promises?”

The agreement made between members of the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude oil production has been met by much skepticism. The OPEC deal was heralded as a win for oil-producing countries, but close examination reveals that the oil market remains as volatile as ever and some of the proposed cuts have yet to be implemented. For years, OPEC has attempted to stabilise the global crude oil price through a number of deals and mechanisms. The most notable of these being the output cut agreement made in late November of 2016. This was an historic deal that saw members of OPEC commit to cut their production levels from the 33.7m barrels per day. The countries involved agreed to cut their output by a target of 1.2m barrels per day. However, in the wake of the deal, market reactions to news of the OPEC cuts have been mixed. Many analysts have pointed to the narrow time line for the cuts to be implemented along with the lack of compliance from several members. A major concern is that the volatility of the oil market remains unchanged since the deal. This suggests that production levels remain at the same levels as before the deal was struck. Furthermore, despite the deal being in place, crude prices have remained relatively flat. This has led many to ask whether or not the OPEC deal will actually be effective in bringing crude prices down. Another issue that has raised eyebrows is the fact that, while some OPEC countries have honored their commitment and reduced their output, others have refused to do so. A lack of cooperation from several members means that the 1.2 million barrels per day reduction promised by the deal may not be fully realized. This also could mean that the OPEC deal may not be able to bring about the stability and price reductions that were initially envisioned. The OPEC deal is certainly a step in the right direction, but its success is far from certain. The volatility of the oil market and the lack of compliance from some members mean that the cuts may not be as successful as hoped. Unless there is stronger enforcement of the rules and stricter penalties for not meeting the cut targets, then the OPEC deal may be all but worthless.

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