The Organization of the Petroleum Exporting Countries (OPEC) is a group of 13 oil-producing countries that control approximately 44% of the world’s oil production. OPEC’s primary objective is to stabilize oil prices and ensure a steady supply of oil to the global market. In recent years, OPEC has been committed to reducing oil production in order to support higher oil prices. This commitment has had a significant impact on the price of West Texas Intermediate (WTI) crude oil, which has increased by $2 per barrel as a result of OPEC’s adherence to its production cuts.
OPEC’s commitment to reducing oil production began in 2016, when the organization agreed to cut production by 1.2 million barrels per day (bpd) in an effort to support oil prices. The production cuts were extended in 2017 and again in 2018, with OPEC and its allies agreeing to cut production by a total of 1.8 million bpd. The goal of these production cuts was to reduce the global supply of oil and support higher oil prices.
OPEC’s adherence to its production cuts has been impressive, with the organization consistently exceeding its targets. In fact, OPEC’s compliance with its production cuts reached a record high of 129% in April 2019, meaning that OPEC countries were cutting more oil than they had agreed to. This high level of compliance has helped to reduce the global supply of oil and support higher oil prices.
The impact of OPEC’s production cuts on WTI crude oil prices has been significant. Since the production cuts were first announced in late 2016, WTI crude oil prices have increased by approximately $20 per barrel. While other factors, such as geopolitical tensions and changes in global demand, have also contributed to these price increases, OPEC’s production cuts have been a major driver of higher oil prices.
The $2 increase in WTI crude oil prices that has resulted from OPEC’s adherence to its production cuts may not seem like a significant amount, but it can have a big impact on the global economy. Higher oil prices can lead to higher gasoline prices, which can increase the cost of transportation and impact consumer spending. In addition, higher oil prices can lead to higher inflation, which can impact the overall health of the economy.
Despite the positive impact that OPEC’s production cuts have had on oil prices, there are concerns about the long-term sustainability of these cuts. Some analysts argue that OPEC’s production cuts are simply delaying the inevitable, as increased production from non-OPEC countries, such as the United States, is likely to offset any reductions in OPEC’s production. In addition, there are concerns that OPEC’s production cuts could lead to a loss of market share for OPEC countries, as other producers step in to fill the gap left by reduced OPEC production.
In conclusion, OPEC’s adherence to its production cuts has had a significant impact on WTI crude oil prices, with a $2 increase per barrel resulting from the organization’s commitment to reducing oil production. While this increase may not seem like a significant amount, it can have a big impact on the global economy. However, there are concerns about the long-term sustainability of these production cuts and their impact on OPEC’s market share.
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- Source: https://zephyrnet.com/wti-crude-oil-climbs-2-as-opec-sticks-to-its-word-forexlive/
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