The Organization of the Petroleum Exporting Countries (OPEC) and Russia have reportedly decided to extend cuts in oil production until 2018 with an aim to regain control over the global shale oil industry led currently by the U.S. The deal between Russia and Saudi Arabia, the world’s leading oil producing nations, apparently also focused on including the two members of OPEC, namely, Libya and Nigeria, for restricting oil production. Earlier, these two countries were permitted to produce oil without resorting to any cuts in the oil production.
As per sources, the agreement between OPEC & Russia came into existence in 2016. Since then, a fall in the global inventories have been witnessed and the oil costs have increased by over USD 20 per barrel. But, by keeping in check the oil production rate at 1.8 million barrels per day for the next nine months, the major oil producing nations aim at the oil stocks accumulation for an average of five-year span.
Sources have cited that prior to the discussions between Russia and OPEC leaders on oil cuts, the former sought assurances from the latter on the successful implementation of the deal. The Russian government needs greater clarification regarding the agreement, taking into consideration its complicated economic policy making and a fluctuating rate of exchange that changes in the oil costs. Experts have claimed that the oil cuts deal may adversely impact the oil sector investment in these countries.
However, in a contrasting move to counter the oil cuts by OPEC & Russia, the U.S. government took a strategic decision to raise the oil production in September increasing its overall oil production to 9.48 million barrels per day. Industry analysts have projected that the initiative taken by the U.S. to drive shale oil production will attract a large number of investments across the U.S. shale oil industry, boosting the U.S. economy.