Rumours of OPEC’s death have been greatly exaggerated

OPEC has managed to confound its sceptics (including us) by masterminding an agreement between OPEC and non-OPEC countries to cut output substantially next year. This Energy Watch looks at the potential impact on supply next year and what this might mean for oil prices. To recap, after nine months of negotiation, OPEC members announced at the end of November that they had agreed to reduce their production by 1.2m barrels per day (bpd) in January. This was followed a few days later by an announcement that non-OPEC countries had agreed to cut output by a further 0.6m bpd. In total, this deal could reduce production in the first half of next year by around 1.8m bpd (about 2% of global output). if the deal is adhered to in full, this could pull down oil supplies sharply in the first half of next year and rebalance the market much sooner.