After a few days of deliberation, OPEC + has finally decided to cut 1.2 million barrels per day of oil production.
According to the Iranian Energy Minister Bijan Zangeneh, OPEC producers have agreed to cut 800,000 barrels per day and non-OPEC producers, namely Russia, has decided to cut 400,000 barrels per day. This comes a day after the Saudi Energy Minister Khalid Al-Falih was uncertain if a deal could be made. This uncertain deliberation has created much volaitilty in the oil market over the past few days, however, we are now in full rally mode after the decision to cut with January WTI presently up $2.14 to $53.63/barrel.
This agreement should put in a good footing in the oil market, but now we must monitor the compliance level of each country participating in these cuts. OPEC’s integrity has been questioned by some as of late after Qatar decided to leave the group earlier this week. Andy Critchlow of S&P Global Platts noted that after this departure “OPEC really doesn’t exist anymore, it is a two-member organization – Russia and Saudi Arabia.” Saudi Arabia produced approximately 11.3 million barrels per day in November, about a 350,000 barrel per day increase. For both of these reasons, we will wait and see if these cuts on paper will translate into reality to put a serious floor in oil prices.
January RBOB futures are trading higher by $0.0783 to $1.5117/gallon and ULSD is up by $0.0856 to $1.9438/gallon.