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$54.7
price of a barrel of crude
Having been confined to the USD 40-50/barrel range
during the third quarter of 2016, the price of a barrel
of crude closed the year at USD 54.70.
OPEC decided to cut back oil production in order to
stabilize the world’s fuel markets.
Having fallen to their lowest levels since 2003, oil prices
began to show some volatility during the first three quarters
of 2016. At an extraordinary OPEC meeting that was called on
30 November 2016, a decision was taken to reduce daily output
by 1.2 million barrels to 32.5 million. It was also announced
that this cutback would not go into effect until January 2017.
Besides being approved by the fourteen members of OPEC, this
decision was also supported by non-member oil-exporters like
Russia, which led to the price of a barrel of Brent crude jumping
to USD 52.6, the highest hitherto witnessed during the year.
Having been confined to the USD 40-50/barrel range during the
third quarter of 2016, the price of a barrel of crude closed the
year at USD 54.70, 45.4% higher than what it had been twelve
months earlier.
The OPEC’s decision applied only to the first half of 2017 but
it was also made clear that it might be extended for another
six months should circumstances make it necessary. Most of
the cuts called for in the agreement were to be made by Saudi
Arabia, the United Arab Emirates, and Kuwait while Libya,
Nigeria, and Iran were not required to make cuts at all.
Although OPEC’s production cutback will adversely affect
consumers by making oil costlier, it can be expected to have a
positive impact on those countries that are net oil exporters. In
the wake of OPEC’s late-November decision, the OECD revised
its oil price projection for 2017 from USD 53 to USD 55 a barrel.
The Institute of International Finance however, citing shale
oil exploitation and high stock levels in the US, expressed the
view that any increases in Brent oil prices would be much more
modest and that, despite the OPEC cutback decision, prices
would remain within the USD 49-52/barrel range during 2017.
Brent Oil Price
(USD/barrel)
01/2016
02/2016
03/2016
04/2016
05/2016
06/2016
07/2016
08/2016
09/2016
10/2016
11/2016
12/2016
60
50
40
30
20
10
0
The Association of Financial Institutions
Annual Report 2016
33