Oil Agreement Indications

As the supply agreement for oil-producing countries has taken effect, oil finally reached a price level seen in July of 2015. These highs are due to a cooperative agreement between both OPEC and numerous non-OPEC producers. Notably, from the non-OPEC side, Russia and Mexico have cut production by 300,000 and 100,000 barrels per day, respectively.

This marks the first coalition of its kind since 2001, and international oil companies have already seen the boost to come from the effect. The real question now that is on the mind of traders and speculators concerns the implementation of the supply cuts. At the end of the day, the market is pricing in a fully-efficient and successful cut made by all participating countries. But the real price swings that will occur have to do with how accurately the countries will move forward with the cuts, and whether it will be to the same extent as projected.

Pundits are considering the economic position of these oil-producing countries as the number one deterrent against any numbers not meeting expectations. However, the actual results will remain to be seen as we see the first supply numbers come out next month.

FT

 

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