Crude Oil Prices Skyrocketed At Their Highest Levels After OPEC And Other Oil Producers Decided To Cut Oil Output.
Oil prices stood at their highest levels since mid-2015 on Monday after OPEC and other producers had decided to jointly reduce their output in 2001 to control oversupply and bolster markets.
The international benchmark for oil prices Brent crude, edged higher to $57.89 per barrel in overnight trading session between Sunday to Monday, marking its highest level since July 2015.
U.S. West Texas Intermediate (WTI) crude also settled at $54.51 a barrel in July 2015.
Meanwhile, Brent remained steady at $56.58, while WTI stood at $53.92, but were both still surging more than 4 percent from their last settlements.
With the previous deal signed after more than a year of arguing within the Organization of the Petroleum Exporting Countries, including mistrust in the willingness of non-OPEC Russia to participate, all eyes are now diverting to compliance of the agreement.
"We believe that the observation of the OPEC-11 and non-OPEC 11 production cuts is required to sustainably support... oil prices to our 1H17 WTI price forecast of $55 a barrel," Goldman Sachs said.
"This forecast reflects an effective 1.0 million barrels per day (bpd) cut vs. the 1.6 million bpd announced cut and greater compliance to the announced cuts is therefore an upside risk to our forecasts."
AB Bernstein said the agreed deal "amounts to an aggregate supply cut of 1.76 million barrels per day (bpd) from 24 countries which currently produce 52.6 million bpd, or 54 percent of world oil supply."
Bernstein said that "some of the non-OPEC supply cuts will come from natural decline, but most will come from self-imposed cuts."
Subsequently, Saudi Aramco told the U.S. and the European customers it will cut oil deliveries from January.
Will OPEC Gambit Oil Hike Work?
Given a ballooning months of speculation by oil market watchers, OPEC had announced a six-month production cut of 1.2 million barrels per day and wished to help lift the price, effective on January 1.
Current Stance of Oil Price Movement
The chart below illustrates the crude oil price movement ahead of the OPEC’s decision to cut its six-month production of 1.2 million barrels per day.
Given a bullish tone of the oil, market participants have begun buying the risky commodity as it is widely anticipated that the OPEC production, oil cut will give a huge impact on the crude oil price movement.
Further, the commodity is currently showing a consolidating movement between resistance 55.09 and support 53.43 and traded in a light trading volume in yesterday’s close.
Conclusion
As the illustrative chart above shows a bullish tone on the commodity, market participants are recommended to still wait on the sidelines as there aren’t any supporting candle present as of writing.