Houston Agreement: What it is and Why it Matters

The Houston Agreement is an agreement that was reached among countries that are members of the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC oil-producing countries in December 2016. The agreement is aimed at stabilizing global oil prices by reducing oil production.

Under the agreement, OPEC committed to reducing its oil production by 1.2 million barrels per day (bpd), while non-OPEC countries agreed to reduce their production by 558,000 bpd. The agreement was initially set to last for six months but was later extended until March 2018. It was further extended until the end of 2018 and then until June 2019.

The Houston Agreement came at a time when global oil prices were at historic lows due to oversupply. Oil-producing countries, particularly those in the Middle East, were struggling to maintain their economies as the low oil prices impacted their revenue. The agreement was seen as a way to address the oversupply issue and bring stability to the market.

The Houston Agreement has had a significant impact on the global oil market. Oil prices have increased since the agreement was reached, with Brent crude oil prices increasing from $50 per barrel in December 2016 to around $80 per barrel in September 2018. The agreement has also led to increased cooperation among OPEC and non-OPEC countries, with some countries that were previously not part of OPEC, such as Russia, playing a key role.

Despite the success of the Houston Agreement, it has not been without its challenges. Some countries, such as Iran, have been exempt from the production cuts due to geopolitical tensions, while other countries have failed to meet their production targets. There have also been concerns about the potential impact of the agreement on the US shale oil industry, which has been growing rapidly in recent years.

In conclusion, the Houston Agreement is an important milestone in the history of the global oil market. It has demonstrated the ability of OPEC and non-OPEC countries to work together to address a common challenge, and has brought stability to the market. While the agreement has faced some challenges, it is clear that it will continue to play a key role in shaping the future of the oil industry. As a professional, it is important to highlight the significance of the Houston Agreement not only for the oil industry but also for the global economy.