Last year, in November OPEC countries, along with 11 participating non-OPEC countries including Russia agreed to reduce oil production by 1.76 million barrels per day, beginning this year. The initial deal was agreed for six months, which in the Month of May was extended for another nine months until March 2018. Despite the deal and the extension, the oil price failed to cheer up and since the agreement in May, the price has declined more than 18 percent. The North American benchmark WTI is currently trading at $42.8 per barrel and Brent at $2.5 per barrel premium to WTI.

This continued decline in oil price points to a major fallout of the OPEC and that is getting used to and no exit strategy. The financial market participants who are pushing down oil price despite the shrinkage in supplies have gotten used to the OPEC deal, which as of now has a pledge to continue without any exit strategy in place. Under the current circumstance, OPEC would have to continue with the deal perpetually unless the price improves significantly. It is almost similar to the actions taken by central banks, who are forced to continue with their easy monetary policies as inflation remains far-fetched.

The oil market is in no position to handle a return of 1.76 million barrels per day and it is not very likely that OPEC players could continue with the supply cuts indefinitely without some members throwing in the towel. The North American benchmark WTI is currently trading at $42.8 per barrel and Brent at $2.5 per barrel premium to WTI.