What does OPEC’s tentative deal mean for oil?

USA benchmark crude rose more than 5 percent to $47 a barrel on the news, pending final details about the cut, which won’t be known until after another OPEC meeting in November.

“This action will help OPEC keep those shorts on the sidelines until November, when winter-related demand will return and the prospect of market balancing is in further focus”. But finally, OPEC countries reached agreement on a preliminary accord on Septembers 28 to restrain oil output, which in turn should put an end to the long-standing oversupply issue and shore up long-ailing oil prices. Brent oil futures rose 5.9 percent the day the deal was announced. Four of the world’s top 5 producers aren’t even part of OPEC. It is now estimated to be pumping around 3.6 million. We expected the market to shift to a supply deficit sometime in 2017, and with an OPEC production freeze this scenario is brought forward by a few months’.

The outline deal will limit output from Opec countries to between 32.5 million and 33 million barrels a day, said Mohammed Bin Saleh Al-Sada, Qatar’s energy minister and current president of Opec.

Whether or not the OPEC deal sticks and whether “cheating” can be controlled, analysts said this didn’t herald a return to the era when OPEC could basically control the oil market through its production levels, not least because non-OPEC countries have a bigger stake than before.

The Indian rupee posted its biggest drop since June on Thursday, after Indian officials said elite troops crossed into Pakistan-ruled Kashmir and killed suspected militants preparing to infiltrate and carry out attacks on major cities, in a surprise raid that raised tensions between the nuclear-armed rivals.

“We think that OPEC is running a risky game if the aim is to push the crude oil price higher from here in the short term as it would just activate more USA shale oil production”, said Bjarne Schieldrop, chief commodity analyst at SEB.

Again Capital founding partner John Kilduff said Thursday that the numbers behind the deal don’t work, because Russian Federation recently boosted output by as much as 400,000 barrels to 10.7 million a day as it started new production this summer.

But many analysts said they were concerned that too many details had been left unresolved and that the deal could unravel.

After sustained pressure from the global oil market, the Organisation of the Petroleum Exporting Countries (OPEC) has agreed to introduce a modest reduction in its oil production. Whatever the case, oil prices are likely to be steady in the medium term thanks to the likely output curb deal. US stocks were poised for a more subdued open.

I think it is definitely a bullish move for oil prices in the short term outlook as above all it shows unity among oil producing nations once again, especially if non-OPEC producers such as Russian Federation were to also join them in cutting their crude output.

The price of crude oil has fallen sharply since mid-2014, when it was over $100 a barrel, dropping below $30 at the start of this year.