The Organization of the Petroleum Exporting Countries who met last November 30 in Vienna for the much-awaited formal meeting between its member countries and experts regarding have now agreed to cut their production amidst concerns over member countries such as Saudi Arabia, Iran, and Iraq who have then stated their individual concerns regarding the output cut which have led to the markets raising their doubts on the outlook.
Russia, who is a non-OPEC member country has also stated that they will also be participating in a production cut. Despite not attending the meeting or sending a representative, the country has earlier voiced
This came as a surprise to a number of investors as the journey to the formal talk in Vienna was met with a series of negative news raising concern to the possibility of a collective output cut agreement. Despite the uncertainties, the markets have received the news positively with crude oil prices posting rallies to as much as 9% during early Thursday trading.
The deal concluded with an agreement between the OPEC countries to curb their daily oil production to around 32.5 million barrels per day from the current number of 33.7 million barrels a day while non-OPEC producer such as Russia is set to decrease their production by 600,000 barrels in their part to help oil prices go up. Aside from avoiding an oversupply globally, the deal also aimed to help oil prices to recover to more stabilized levels.
Crude Oil Prices
As early as the first day of the month, the Brent crude oil prices have rallied to as much as 8.10% trading at around $51.57 per barrel while the U.S. Crude rose to 8.3% before trading lower at $49 per barrel. Despite the positive gains and recovery that crude markets have shown, analysts are warning investors regarding the organization’s potential failure to show the implementation of the deal could lead the oil prices to drop back again below $40.
The New York Mercantile Exchange surged up by 9.3% to $49..44 per barrel up by $4.21 which is the highest since October while the January Brent crude on London’s ICE Futures Exchange traded higher by $4.09 or 8.8% at $50.47 per barrel. At the moment, analysts are stating that the OPEC’s immediate action regarding the deal reached between the organization can lead the prices of oil to surge to as much as $60 next year although the prices can still go back to as low as $40 should OPEC fail to show lesser numbers by next year. Some experts also argue that the price will not be able to remain above $55 for too long as the markets also await actions from the US. As of now, investors and cartel members are focused on maintaining the price of oil above $50.