Yesterday, the price of Brent crude oil edged up as some of the major oil producers in the world agreed on a last-minute deal to decrease their output.
At the meeting that was held in Vienna last Friday, the members of the Organisation of the Petroleum Exporting Countries (Opec) and its allies including Russia committed to lessening their oil production by a higher-than-expected 1.2m barrels per day.
Oil prices rallied by nearly three percent to $62.92 after the move. It defies the calls of US President Donald Trump to maintain the high levels of production.
The largest producer of the Opec, Saudi Arabia, has been urging for a concerted deal to restrict the output in an attempt to push the energy prices, which have dropped by 30 percent since October, up.
According to Cantor Fitzgerald Europe, a financial services company, the deal will likely stabilise the prices at between $60 and $65 per barrel.
Iran, Libya, and Venezuela have all been made exempt from the cuts. It is set to come into effect from the beginning of next year.
Neil Wilson, the chief market analyst of Markets.com, stated: “The cut is a real positive after some fairly tough negotiations.”
He added: “The fact that the OPEC-Russia alliance is still holding matters as much as the details of the deal itself. It’s probably a little better than the market had been expecting, but not by a lot. I’d still say that a deeper cut would be needed to really see oil rally back to $70. Indeed the rally has failed to top the daily peaks seen on Dec 4th and 5th, which is indicative of the fact the market is not fully bought into this deal as being enough to tilt the market fundamentally back into balance quickly. We need to see those highs scaled before we would be able to say this is the start of a sustained rally back to $70.”
Wilson continued: “The deal does though suggest we have something of a floor under Brent at $58, which is now forming very stiff support.”