New production targets set by OPEC to accelerate the oil market rebalancing will take effect from January 2017.
At its 171st meeting in Vienna, members of OPEC agreed, in line with the ‘Algiers Accord’ to implement production targets of 32.5 million barrels per day, which represents the first such reduction in output since 2008. These targets, which will be effective from January 1, 2017, will accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.
The conference noted that global economic growth forecasts and projected supply suggest that market rebalancing is underway, but that OECD and non-OECD inventories stand well above the five-year average. The conference stressed the importance of stock levels being drawn down to normal levels as well as continued investment in the industry.
In addition to these new production levels, a high-level monitoring committee comprising oil ministers and assisted by the OPEC Secretariat will be established to monitor the implementation of the agreement.
Subsequently, in an OPEC and non-OPEC ministerial meeting, it was agreed that Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, the Russian Federation, Republic of Sudan and the Republic of South Sudan would reduce their respective oil production. This will be done voluntarily or through managed decline and the combined target was agreed at 558,000 barrels a day for six months.