The Importance of OPEC's September Agreement

By Sara Vakhshouri

Dr. Sara Vakhshouri is a nonresident senior fellow with the Atlantic Council's Global Energy Center. She is the founder and President of SVB Energy International, a strategic energy consulting firm based in Washington, DC. She is an internationally recognized expert and has extensive experience in global energy market studies, energy security, and geopolitical risk with a special focus on the Middle East, Iran, and Mexico. Dr. Vakhshouri worked in both the public and private sectors of the Iranian energy industry from 2000 to 2008, including at the National Iranian Oil Company. Dr. Vakhshouri has been based in Washington, DC since 2009, where she has advised numerous energy and policy leaders, international corporations, think tanks, investment banks, and law firms on the global energy market, the geopolitics of energy, and investment patterns. She has published articles in numerous journals including The Economist,Middle East Economic Survey (MEES), and Oil and Gas Journal. She is frequently quoted in outlets such as The Financial Times, Reuters, The Financial Post, and Energy Intelligence, and she has appeared on Bloomberg, BBC, Al Jazeera, Platts Energy TV, Voice of America, and CBC. She is the author of The Marketing and Sale of Iranian Export Crude Oil since the Islamic Revolution. Dr. Vakhshouri has a PhD in energy security and Middle Eastern studies, and was a visiting fellow at the Oxford Institute for Energy Studies. She has an MA in business management (international marketing), and another MA in international relations.

OPEC members have finally reached an agreement to curb the global oil supply by cutting their overall production from 33.75 million barrels per day (mb/d) to the range of 32.5-33 mb/d. The main challenge will be the agreement’s implementation and how the supply will actually be reduced. The details of the agreement are going to be discussed and finalized during the next OPEC meeting in Vienna at the end of November.

The OPEC decision has both a psychological and an actual impact on the market and oil prices. At a moment, when there is a serious glut in the market, oil prices are more sensitive to any expectation of the supply and demand trend in the future. Since Iran’s nuclear deal and sanctions removal in January 2016, the prospect of Iran’s production bump has impacted expectations in the market. Iran’s production rise not only had an actual impact on market fundamentals and increased overall global supplies, it also increased the rivalry between major producers over market share. This pushed major producers like Saudi Arabia, Iraq, and Angola to offer further discounts to their costumers in Asian and European markets in order to maintain and increase their market shares in those regions.

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