The Organization of the Petroleum Exporting Countries continues keeping its promise of decreasing oil supply and that stabilized oil prices and brought it to above $501 a barrel from its $30 lows.
In May meeting, OPEC and Russia agreed to extend the process of curbing oil production output to March 2018. After the initial agreement between OPEC, Russia and other 9 non-OPEC countries on reducing the supply glut, oil prices have increased by 13%. Since last year there was a 2% decrease in the supply of oil, which accounts to 1.8 million barrels a day globally.
Many investors are bullish on oil due to the increasing confidence that OPEC and Russia will continue cutting supply. Given that Russia needs the price of $72 a barrel to be profitable this seems like a possible outcome.
For the past year oil prices were fluctuating between $45-$55 a barrel and that number seems to stay in $50-$55 range after the supply cut agreement started showing results. Recently, OPEC Secretary Mohammed Barkindo announced that stockpiles in the Organization for Economic Co-operation and Development were 170 million barrels above their five-year average level in August,” 170 million barrels less than it used to be in the beginning of the year.
Further actions regarding the output levels will be discussed during the OPEC and the Russia-led coalition meeting in November.