Traders remain sceptical that all constituent members of OPEC will adhere fully to the OPEC proposal, including non-OPEC members, to cut global oil production by 2% and return the deeply saturated market back to a state of relative balance, or even deficit.
Signed at the end of November 2016, the deal promised significant supply cuts from many of the members comprising the oil cartel, most notably, considerable cuts by de facto leader Saudi Arabia, who are keen to ensure oil prices continue to rise.
WTI Crude oil prices subject traders to a volatile day of market activity, as the price rose and fell throughout the trading day, before climbing 1.45% to $53.90/barrel at 12:30 p.m ET. Following a sharp rise in the early hours of the trading session, at around 03:25 ET, prices of the commodity fell sharply, bottoming out at $52.40 at 06:05 ET, before more spikes and falls eventually ended with a pre-midday rise to £53.90/barrel.
Concerns remain regarding the capacity of US shale producers to begin cashing in in earnest on the higher prices provided by optimism concerning the OPEC oil cuts. Aswell as the true likelihood of the cuts being achieved – a concern still lingering in the minds of many traders and analysts, who have been subject the market consequences of OPEC members failing to comply to the true premise of production agreements.
However, the general notion remains one of optimism, as seen at the end of 2016 – when, due to the signing of the OPEC deal, energy outperformed. A similar narrative is expected by many if the cartel continues to comply to the proposed cuts. With Oman and Kuwait already posting figures of full compliance with the parameters of the agreement.
The deal, signed at the end of November, is to be implemented this month, with the figures of true production reduction to be posted soon.