Markets and investors are positive about rally in oil prices pushing through until 2017.
After hitting a $53 mark prior to Christmas day, oil prices are now showing positive signs of a rally pushing through until early next year, as the outlook to reduce overall global oil production between OPEC countries and a couple of non-OPEC members such as Russia remains positive.
Aside from placing a cut to avoid global oversupply, the OPEC agreement also aims to stabilize oil prices, which have plummeted a long way since last 2015. The agreement which was finalized at the end of November was marked as a huge deal for the oil markets as the OPEC accord has boosted prices in less than a month to up to $53 from the prices declining to as low as $42 in the previous trading sessions.
According to analysts, OPEC is expecting a surge in the prices of oil to up to $58 in the first couple of weeks after new year, posting a gain of 29% since the OPEC agreement which will decrease daily production by 1.8 million barrels per day.
The recent surge in crude oil prices was also driven by the market’s demand to raise oil prices back to more stable levels last seen since mid-2014.
Although this might seem like a setback for countries such as Iran, Iraq, and Saudi Arabia who have announced in the earlier parts of the OPEC negotiation that they intend to raise their daily production instead of placing a limit, this will instead help them with the immense spending the following have done to address the lack of budget in their own expenditures and expenses.
According to the International Monetary Fund, the oil prices selling at around the $62 level would fill the gaps in the cash reserves of the following countries when it comes to their expenses in the oil production.
Consecutive Gains In Oil Prices
For the seventh consecutive trading session, oil futures have inched a bit higher at around 0.1% never trading away from the $53 mark supporting bullish bets of the oil price direction until new year.
A strong recovery is still set for oil prices should OPEC countries and those non-OPEC members who agreed to curb production show signs of following the implementation and deal agreed between them.
Along with the whole organization, eleven other countries are set to decrease production, which will result in a collective cut of 1.8 million barrels each day. One of these non-OPEC producers set to trim output is Russia who happens to be one of the instigators of the agreement in the earlier parts of the OPEC talks. The country’s president Vladimir Putin have also actively spoken his support for the outlook.
This would be the first time the organization will cut their production in eight years where oil prices have not traded below $50 since the agreement.
The current steady outlook for oil prices will likely lead to a continuous rally until new year which can be halted when the participating countries and OPEC members fails to show any progress with their initiative to cut their individual daily production.