{
  "title": "OPEC's Rebalancing Act",
  "publication": "IMF Blog, March 15, 2017",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2017/03/15/opecs-rebalancing-act",
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  "summary": "Authors: Rabah Arezki, Akito Matsumoto",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Rabah Arezki, Akito Matsumoto\n- Date: March 15, 2017\n- Key premise: OPEC shifted from maintaining output in November 2014 to committing on November 30, 2016 to a production cut intended to rebalance the oil market and stabilize prices."
    },
    {
      "heading": "The OPEC agreement",
      "content": "- Agreement details:\n  - Six-month, 1.2 million barrel a day (3.5 percent) reduction in OPEC crude oil output to 32.5 million barrels per day, effective in January 2017.\n  - Some OPEC members exempted (for example, Nigeria and Libya).\n  - Non-OPEC producers agreed to cut about 600,000 barrels a day: Russia committed to cut 300,000 barrels, and 10 other non-OPEC oil producing countries agreed to cut the remaining 300,00 barrels a day.\n- Distribution of cuts:\n  - Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait are bearing the brunt of the OPEC cuts.\n- Compliance and reported effects:\n  - OPEC reported that compliance was close to 90 percent in January.\n  - Result observed: a small price increase and some price stability, with supply and demand appearing to be in balance at a price just above $50 a barrel.\n  - Reports of lower compliance exist; Saudi Arabia signaled it will do whatever it takes to enhance credibility and has cut production more than required.\n- Short-term threats to effectiveness:\n  - Some OPEC members—Iraq, Libya, and Nigeria—have increased their production since October.\n  - Non-OPEC producers have made smaller reductions than OPEC and are not required to reach targets as soon; Russia had cut only 120,000 of the 300,000 barrels a day it promised as of the report.\n  - Some targeted reductions may be \"phantom,\" reflecting natural declines rather than active cuts."
    },
    {
      "heading": "Shale oil threat",
      "content": "- Price responsiveness and investment:\n  - The $6-a-barrel increase in spot oil prices after hints of an OPEC agreement is expected to stimulate oil production investment in 2017.\n  - US shale wells can begin production within a year of the initial investment, unlike conventional oil investments which take a number of years.\n- Historical precedent:\n  - In early 2014, expectations of OPEC support kept prices around $100 a barrel, stimulating non-OPEC production (including shale); oversupply later built up and prices fell precipitously after the November 2014 OPEC meeting.\n- Recent indicators:\n  - US shale oil investment declined sharply after the 2014 price drop, and production declined within a few months.\n  - The oil price rebound in 2016 and the September 2016 announcement in Algeria that OPEC intended to cut production helped boost investment.\n  - By February 2017, US oil investment, as measured by the number of drilling rigs in operation, reached its highest level since November 2015.\n- Structural change in shale production:\n  - US producers have become more efficient with improved operations and increased selectivity in wells.\n  - Although ultimate shale capacity is uncertain, shale’s fast responsiveness to price changes is now a central feature of the oil market and will lead to more limited and shorter production and price cycles."
    },
    {
      "heading": "Bottom line / Implications",
      "content": "- The OPEC agreement has hastened the rebalancing of the oil market and should reduce excess supply at least temporarily.\n- Futures markets suggest expectations are firmly anchored at around $50 a barrel.\n- The forces unleashed by the OPEC agreement—especially responsive shale production—will limit the agreement’s effectiveness over the next few years.\n\nSource: OPEC's Rebalancing Act — Rabah Arezki, Akito Matsumoto, March 15, 2017\n\n---\n\n Content in this bundle\n\n- Перебалансировка нефтяного рынка ОПЕК, Рабах Арецки и Акито Мацумото, 15 марта 2017 года\n  - Перебалансировка нефтяного рынка ОПЕК, Рабах Арецки и Акито Мацумото, 15 марта 2017 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Перебалансировка нефтяного рынка ОПЕК, Рабах Арецки и Акито Мацумото, 15 марта 2017 года (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- عربي\n- https://www.imf.org/wp-content/uploads/2017/03/imf-opectable.png\n- https://www.imf.org/wp-content/uploads/2017/03/imf-opecchart1.jpg\n- https://www.imf.org/wp-content/uploads/2017/03/imf-opecchart2.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2017/03/15/opecs-rebalancing-act"
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    "Authors: Rabah Arezki, Akito Matsumoto",
    "Published: March 15, 2017",
    "Authors: Rabah Arezki, Akito Matsumoto",
    "Date: March 15, 2017",
    "Key premise: OPEC shifted from maintaining output in November 2014 to committing on November 30, 2016 to a production cut intended to rebalance the oil market and stabilize prices.",
    "Agreement details:",
    "Distribution of cuts:",
    "Compliance and reported effects:",
    "Short-term threats to effectiveness:",
    "Price responsiveness and investment:",
    "Historical precedent:",
    "Recent indicators:",
    "Structural change in shale production:",
    "The OPEC agreement has hastened the rebalancing of the oil market and should reduce excess supply at least temporarily.",
    "Futures markets suggest expectations are firmly anchored at around $50 a barrel.",
    "The forces unleashed by the OPEC agreement—especially responsive shale production—will limit the agreement’s effectiveness over the next few years.",
    "**Перебалансировка нефтяного рынка ОПЕК, Рабах Арецки и Акито Мацумото, 15 марта 2017 года**",
    "[عربي](http://blog-montada.imf.org/?p=4766)",
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