Source: TheHill.com | Herman Wang & Anthony Starkey | February 15, 2017
After a year of contentious negotiations that finally yielded a deal to cut a mere 1 percent of world oil production in a bid to prop up prices, the Organization of Petroleum Exporting Countries (OPEC) has begun 2017 with surprising discipline, defying skeptics of its resolve and shrugging off its own spotty history of breaching quotas.
An S&P Global Platts analysis of OPEC output in January, the first month of the six-month deal, found 91 percent compliance with the required cuts — not perfect, but above expectations. The oil market has, so far, responded bullishly to the signs that OPEC, which controls one-third of global oil production, is sticking to the deal.
Refineries in demand growth markets in Asia, which largely rely on crude from the Middle East, have been buying heavily to lock up supply in anticipation of a tighter market in the months to come, due to the OPEC cuts.
But key to whether OPEC succeeds in its goal of stabilizing the oil market and preventing another slump in prices is how U.S. producers respond.
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