Oil Futures Decline as OPEC Questions Member Compliance

Oil futures plummeted Monday as investors begin to worry about OPEC members’ commitment to output cap agreements. This concern prompted a meeting in Abu Dhabi, among OPEC’s key members, to discuss the issue. Investors eagerly await news from the meeting, as the negations made at the meeting will likely result in significant price fluctuations, and thus heavy trading of crude oil futures. The meeting concerns certain members’ commitment to the output cap agreed upon in late 2016. The pact signed by the UAE and 10 other members specifically decreased the allowable output by signers in an attempt to limit global supply and thus, keep oil prices reasonably high. The deal so far has not produced any meaningful effects.

One major point of discussion in the meeting will be Libya and Nigeria, and whether they will join the output cap pact. These two African nations were exempt from the pact as their oil output has been marred by military conflict. However, the two countries now producing at around their peak historical levels. If these countries agree to the output caps, we are likely to see a rise in the price of oil and an immediate increase in the purchase of oil futures.

What does this mean for ordinary Americans. Assuming the meeting produces an increase in the price of OPEC oil, the need to acquire oil domestically will be greater, which means that American oil companies may start seeing a business boom.


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