Oil prices rose early on Friday, headed for a fifth week of gains, after OPEC+ managed to seal a compromise deal over its oil production policy early next year, presenting a united front of a unanimous decision after days of disagreements.
As of 8:51 a.m. ET on Friday, WTI Crude was up by 1.03 percent at $46.06, and Brent Crude was nearing the $50 a barrel mark, up 1.13 percent on the day at $49.25.
After days of debates, OPEC+ decided on Thursday that the group would add in 500,000 barrels per day (bpd) in January to its oil production quotas, which currently calls for a production cut of 7.7 million bpd. The total production cut in January will now be 7.2 million bpd. Future assigned quotas could rise or fall, and to determine those levels of oil production beyond January, OPEC+ ministers will hold additional meetings-one each month.
Although the OPEC+ group failed the deliver the most widely expected outcome-a three-month extension of the current level of cuts, the fact that the alliance managed to exit this week's meeting whole and with some sort of a decision reassured the market that neither the alliance nor the cartel would be breaking, at least for the next month or so.
"With the expected vaccine driven recovery in global fuel demand, this deal will go a long way to ensure the price of oil remains supported until it can stand on its own feet without support. Brent is likely to print $50/b sooner rather than later with already strong Asian demand eventually being joined by others once the Covid-19 cloud lifts," John Hardy, Head of FX Strategy at Saxo Bank, said on Friday.
"While the deal does fall slightly short of expectations, importantly it does look more certain that the oil market will be in deficit over the first quarter of next year, and so the market should continue to draw down inventories," said Warren Patterson, Head of Commodities Strategy at ING.
By Tsvetana Paraskova for Oilprice.com
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Comments
The deal will help accelerate the depletion of global oil inventories which have already fallen to an estimated 250 million barrels and along with firming Asian demand could push prices higher.
Against a growing vaccine confidence and the momentum it has generated in the global oil market, Brent oil prices could be projected to hit $60 in the first quarter of 2021 and $70-$80 by the third quarter.
In May this year and immediately after China exited the lockdown, Golden Sacks projected that oil prices wouldn’t exceed $40 and I betted my projection against theirs saying that oil prices could hit $45-$50 a barrel during the second half of 2020. I won the bet with oil prices hitting almost $50 a barrel today.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
I mean in short term they will achive their goals but in long term they are litterally killing the oil industry?
The only reason why electric revolution isn't progressing fast is relative cheap fuel. If the cartel keeps manipulating the market using It position to ramp up the prices, people won't find petrol vehicles attractive anymore and in 10 years the opec countries will have a problem to find buyers of their goods. With Biden green plan, EU green plan and China electricmobile plan they will starve to death.
The only way to stop this is keeping oil competitve.
Anyway, regards to moderators, really nice site.