Crude oil prices increased in the early hours of Monday to its highest level since mid-2015, after OPEC and fourteen non-OPEC countries concluded deal to lower yields. The US light WTI crude oil reached 54.51 USD per barrel, while the European Brent oil rose to 57.89 USD per barrel during the night between Sunday and Monday.
The deal was struck after nearly an year debate in the ranks of OPEC and the background of mistrust that countries outside the cartel will participate in an agreement to lower yields. Now the focus of investors is drawn to what extent will keep their promises.
According to investment bank Goldman Sachs, the average price of WTI crude oil in the first half of 2017 will be 55 USD per barrel. This forecast reflects the effective decrease of 1 million barrels per day amid the announced 1.6 million barrels. So if there is strict compliance with the deal price may be higher.
OPEC plans to reduce output by 1.2 million barrels per day from January 1, as the largest producer Saudi Arabia will lower production by about 0.486 million barrels per day to cope with oversupply, which destabilized the market for about two years.
On Saturday producers outside the cartel agreed to reduce output by 0.558 million barrels per day, which is slightly below the target of 0.6 million barrels per day, but is the largest contribution from countries outside OPEC ever.
Once the reductions are applied at the beginning of 2017, the oil market will shift from surplus to deficit and we expect the first half of 2017, to demand exceeds supply by 0.8 million barrels per day. However, some analysts expect the industry attracted by higher prices again increase yield.
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