The 14 countries comprising OPEC reached an oil production agreement. Beginning on January 1, 2017, OPEC is set to cut production by 1.2 million barrels per day or 1 percent of total global oil production.
This could impact Oklahoma because of the reliance on oil prices for the state’s economy.
Non-OPEC countries, including Russia, have signaled that they are prepared to participate in the agreement as well. According to the Oil Price Information Service (OPIS), these countries are cutting back production – Algeria, Angola, Ecudor, Gabon, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, United Arab Republic and Venezuela.
The agreement exempted Nigeria and Libya, and Indonesia has suspended its membership within OPEC, as it is a net importer and would not be able to implement production cuts.
This agreement is slated to last six months. OPEC plans to meet again on May 25 and will discuss the possibility of an extension.
OPEC also announced they would establish a Ministerial Monitoring Committee to help implement the cuts and oversee member compliance with the agreement. The committee will be led by Algeria, Kuwait and Venezuela and two non-OPEC members.
As a result of the announcement, markets reacted quickly, and crude oil prices increased by $4.21 to settle at $49.44 (as of November 30).
According to the American Automobile Association the impact on retail prices will most likely be seen by early December, and any lingering impact on prices will depend on whether OPEC follows through and successfully implements the cuts in 2017. Gas prices increased slightly since the announcement. Prior to the OPEC agreement being reached, retail gasoline prices were in line to drop toward the $2.00 a gallon level in December. It is still possible for prices to get there since demand remains relatively flat and inventories have grown over the past four weeks, but the path back to $2.00 may be delayed as a result of the OPEC production cut announcement.