OPEC produces a third of global oil, or around 33.6 million bpd, and the deal it would reduce output by 1.2 million bpd from January 2017. That’s partly due to the fact that President-elect Donald Trump has promised to free up more oil drilling in the USA, which would increase global supply.
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The agreement has sparked a two-day rally in oil of about 11 percent to above $50.
Al-Abadi’s comments could be critical because Iraq along with Iran has been reluctant to go along with cuts, creating an obstacle for an OPEC deal, according to published reports.
The shift – aimed at draining a crude glut that’s pushed down prices for two years – will help revive the tattered finances of oil-producing countries and reverberate in markets around the world, from the Canadian dollar to Nigerian bonds to U.S. shale equities.
Meanwhile, it was just last week that many on Wall Street thought there would be no OPEC deal. We are not going to return to that level in six months.
It’s possible the cutback will have a lasting effect on consumers as oil is used for auto fuel, heating and electricity.
“The consumer isn’t really focused on gasoline since prices remain low”.
“They don’t have to do much because the market was moving into balance already”, Tim Pickering, founder and chief investment officer of Auspice Capital Advisors in Calgary, said by telephone.
At 10:59pm BST, the Brent front month futures contract was up 4.05% or $2.10 to $53.94 per barrel, adding to an overnight spike of over 8%.
The Organization of the Petroleum Exporting Countries at a meeting in Vienna on Wednesday agreed on specific targets to enact a preliminary deal struck in September created to ease a global crude supply glut and boost prices. Tehran had insisted on keeping its production near 4 million barrels a day, which is the amount it was pumping before sanctions were imposed.
“The losers are Europe and Japan – oil-importing regions of the world”, Guatieri said. “The biggest winners from the agreement are U.S. shale producers, who will expand production as prices rally”. Brent is off the 12-year low of $27 per barrel marked in January but still less than half of where they were in 2014. The number of active US drilling rigs bottomed out at 404 in May and has been rising since, to just below 600 last week.
For the US economy, that’s “a sweet spot. a high-enough price to spur investment in the energy industry but not enough to seriously drain purchasing power” of consumers, he said.
Australia’s leading oil producers will be on watch today following the surprise news that the Organisation of Petroleum Exporting Countries (OPEC) has come to an agreement to cut production for the first time in over eight years.
“Saudi Arabia has probably agreed to this to prevent the OPEC meeting ending in acrimony”, he added. Germany’s DAX fell 0.8 percent to 10,560.
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Energy stocks surged on news of an output deal. “Today it’s nearly impossible to get a hot rig” with a crew.
