WORLD, December 13, 2016 (CNBC): The next few weeks will give investors an insight into whether the production cuts by OPEC and non-OPEC will be fully implemented and will be a crucial period for prices of the commodity, according to a new monthly report by the IEA (International Energy Agency).
“For contractual and logistical reasons, we might initially see that the output cuts do not fall neatly into place,” the Paris-based organization said in the report Tuesday.
“The deal is for six months and we should allow time for it to be implemented before re-assessing our market outlook. Success means the reinforcement of prices and revenue stability for producers after two difficult years; failure risks starting a fourth year of stock builds and a possible return to lower prices,” the IEA added.
After several meetings this year, OPEC countries decided to cut production by 1.2 million barrels a day starting in January. Non-OPEC members, such as Russia, joined the efforts earlier this month sending oil prices higher.
According to Neil Atkinson, head of the oil industry and markets division at the IEA, it was in the “mutual interest” of OPEC and non-OPEC members to reach such an agreement.
“We know the financial situation of many of the producers is fairly challenging whether they are OPEC and non-OPEC,” Atkinson told CNBC on Tuesday.