The agreements in recent weeks are a U-turn for the Saudis and their allies, such as Kuwait and the United Arab Emirates, which have pursued a two-year policy of increased oil production aimed at lowering prices to oust the most expensive producers in the United States and elsewhere. The experience had mixed results, as U.S. production proved more resilient than some analysts had expected, while the resulting low prices weighed on the finances of countries such as Saudi Arabia and Russia, which depend on oil revenues. The OPEC agreement, while likely to raise oil prices in the short term, will have little long-term impact. It comes at a time when seasonal demand for oil, particularly in the United States, decreases during the winter months, when people drive less. And like other OPEC supply agreements in the past, they may not be able to hold or cheat. «We have had great success today,» said Mohammed Bin Saleh Al-Sada, Qatar`s energy minister and chair of the OPEC conference. «This agreement is a responsible responsibility» for all oil-producing nations, he said, as well as the «well-being and health» of the global economy. Nevertheless, the agreement indicates that Saudi Arabia, the dominant member of OPEC, wants to preserve oil prices from a further decline. The government`s budget deficit in 2016 is expected to be close to the previous year`s $98 billion deficit, forcing the country to reduce social spending and borrow on international credit markets. The deal comes less than two weeks after OPEC members agreed on production cuts. It is expected to help raise oil prices further, which have risen by more than 15% since 29 November.
International benchmark Brent crude oil is now trading around $54 a barrel. However, some analysts have said that these price levels, which are half as long as they were two years ago, may not be sustainable. In today`s market, major exporters such as Iran, Russia and Saudi Arabia are engaged in a fight for market share, particularly in Asia, and will not want their rivals to increase their sales at their expense.