1. NS3040 Fall Quarter 2017 OPEC Agreement, September 2016

2. OPEC Agreement I
Stratfor, “For OPEC a Production Cut Aims to Head off Further Price Drops”, September 30, 2016
September 28, 2016 agreement aims at cutting oil production from roughly million  to between 32.5 million bpd and 33 million bpd.
Cut marginal, but first since crisis in 2008
Also first response since price collapse in second half of 2014 – peak $110, bottomed out at $25 January 2016
Issues to be decided before November 30 meeting:
Who will shoulder brunt of cuts?
How to handle rising production from Iran?
How to reconcile differences between producers?

3. OPEC Market Shares

4. Iranian Production

5. Largest OPEC Producers

6. OPEC Agreement II Overview
Deal does not necessarily represent attempt to push up prices
Instead, a reaction to market conditions that expect more oil coming online soon
With tentative deal OPEC trying to cushion impact of new supplies – want to prevent prices from dropping below level many OPEC countries are comfortable with
OPEC now largely in defensive stance

7. OPEC Agreement III Explaining the Shift
Within OPEC Nigeria, Libya, and Iraq seeing small bumps in production and exports
If sustained could add more than 800,000 bpd over next couple of months – more than entire cut OPEC is proposing
These countries likely exempt from any production cut, although Iraq may be subject to a freeze
Libya and Iran have seen their production levels artificially low because of violence and political dispute
Nigeria militant attacks on pipelines have been repaired
Iraq deal between Kurdish leaders and government to jointly export 150,000 bpd from Kirkuk

8. OPEC Agreement IV Beyond OPEC OPEC must
Large field in Kazakhstan will start coming online in October
U.S oil production coming back
Between June 2015 and July 2016 production fell from 9.6m bpd to 8.45m bpd due to low oil prices
Production stabilized
Future estimates show a slow rise is prices stay around $50 per barrel
If OPEC tries to maintain a price of $60 would accelerate US production and be self-defeating
OPEC must
Make sure additional production coming on stream does not force price down, while
not sending prices up far enough to stimulate shale production