In December, lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut. OPEC and associated partners agreed to cut 1.2 million barrels per day with OPEC being responsible for 800,000 barrels.
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The latest production cut came as a surprise to many oil analysts as initial estimates were slated at 1 million barrels per day and 650,000 barrels per day for OPEC. Russia, though a non-OPEC member, has emerged as a major player in the negotiations, particularly when discussions got tense between rivals Saudi Arabia and Iran.
Oil producers will utilize output levels from October as the baseline level for cuts while the final deal will be reviewed in April. Final numbers are still under discussion, but according to a delegate familiar with the deal, Russia proposed a 2 percent reduction using that October output level as the baseline metric–the cut would then be equivalent to 228,000 barrels per day, which exceeds the initial cuts of 150,000 barrels per day.
Since 2016, OPEC’s negotiation landscape has changed dramatically with Russia and Saudi Arabia putting aside their differences and now, together, exerting their influence over production discussions.
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