A recent recovery in the prices of crude oil futures is now showing a potential decline after doubts have started to arise on the past week’s agreement to place a cut on the overall production of the OPEC member countries.
The long-awaited OPEC formal meeting held last November 30 in Vienna have successfully ended with a conclusion to lower the daily production of oil that the group believes will stabilize the oil prices back to normal levels.
Aside from stabilizing the oil prices, the aim to end global gut supply was also one of the group’s agenda in their meeting. The meeting led to an agreement to reduce their production by around 1.8 million barrels per day.
Now the rally led by the much awaited OPEC agreement is now facing a potential decline as rising doubts regarding OPEC’s ability to actually implement the production cut has led crude oil prices to inch lower by
Tuesday almost a week after the group agreed to freeze production in an effort to stabilize oil prices. Questions are also being raised to how much the group would be able to reduce their overall daily production or to how they will implement so. There is also the market’s doubt on the organization following their own deal as they are known to have broken rules in the past before.
From a surge of about 20% following the OPEC, crude oil prices are now dropping for the first time in five days. The U.S. West Texas Intermediate (WTI) crude futures dropped to $50.93 per barrel losing 86 cents or less by 1.9%. International Brent crude oil futures settled down lower by 1.9% to $53.91 per barrel.
The result of the formal meeting led the price of crude oil to rally and recover by as much as 20% over than span of one week. From recent trading sessions prior to the meeting, the prices have dropped to as low as $40 before recovering back again to around $51.57 per barrel on the Brent crude at the announcement of the meeting’s result.
The positive signal regarding the outlook started last September 28 at the end of the International Energy Forum an event that also served as an informal OPEC meeting. The said meeting ended with an initial agreement to curb oil production between the member countries. Crude oil futures then have surged to as much as $51 two weeks after the informal meeting before declining back again to around $43 on doubts that an OPEC collective agreement would not be met until November 30.
Some of the doubts then were led by disagreements between a couple of OPEC countries including Iran, Iraq, and Saudi Arabia who have individually stated their own conditions should they agree to curb their production. Iran and Iraq have also originally announced that they intend to increase their production instead of place a cut.
Since the OPEC meeting, the Brent has posted a rally of about 15% for the past four trading sessions. The OPEC agreement is set to reduce production to around 32.5 million to 33 million barrels per day. A meeting between OPEC member countries and even non-OPEC country such as Russia tentatively is set to take place this coming Saturday.