The Organization of the Petroleum Exporting Countries (OPEC) recently announced a massive reduction in oil production, to help stabilize oil prices in the face of a worldwide economic downturn. But the move has been met with a great deal of skepticism by industry experts, who are doubtful that the move will do much to stem the tide of falling oil prices.
Analysts point to the fact that OPEC, despite their status as the world’s largest cartel of oil producers, have been unable to reign in global oversupply and have only managed to marginally influence oil prices through their production cuts. While the news of a reduction in output may have provided a short-term boost, analysts are uncertain how much impact the deal will have on global markets in the long run.
The changing dynamics between OPEC members have also been cited as a possible impediment to the success of the deal. In recent years, relations between some of the cartel’s members have soured, with Saudi Arabia and Iran having engaged in a power struggle that could make it difficult for the Saudis to effectively lead the group.
Additionally, uncertainty surrounding the conditions of the deal has fostered doubt among many investors. While details of the new agreement have yet to be released, some analysts remain unconvinced that the producers will stick to their pledges of production cuts.
Meanwhile, the US continues to lead the charge among non-OPEC producers, with the US Energy Information Administration reporting that American producers have raised their output by 13 percent this year. This further complicates the situation and could possibly lead to reduced demand for oil from the Organization in the future.
For now, OPEC’s production cut agreement is seen as a desperate attempt to restore some stability in the market, but skepticism over the long-term impact of the deal remains. Analysts are concerned that the uncertainty surrounding the agreement, as well as the difficulties in enforcement among cartel members, could lead to the limited effectiveness of the deal. It remains to be seen whether OPEC will be able to weather the current market conditions and restore their reputation as powerful swingoiler in the global oil market.