Russian Federation ready to join OPEC’s new output freeze deal

Benchmark Brent futures settled 4.1 per cent or US$2.10 higher at US$53.94.

Rising from its 171st meeting held at Organization of the Petroleum Exporting Countries (OPEC) headquarters in Vienna on Wednesday 30th November, 2016, OPEC reached a landmark deal that will effectively cut production by about 1.2 million barrels per day, or about 4.5 percent of current production, to 32.5 million barrels per day.

Crude prices, the dollar and bond yields were sharply elevated early on Thursday after OPEC agreed to a deal to reduce output to clear a supply glut that has crunched oil prices and stoked global deflationary pressures.

The national average for a gallon of regular gas fell 6 cents in December 2015 and 41 cents in December 2014, according to AAA.

Motorists are being warned to expect prices to rise at the pumps as a result.

That’s great for gas consumers, but not as great for the 14 OPEC member states, which rely on strong, steady oil prices to bolster their economies.

Oil prices, later eased slightly in early Asian trading on concerns that other producers, especially USA shale drillers, could increase production with rising oil prices.

The agreement has sparked a two-day rally in oil of about 12 percent to above $50. But Donald Trump’s upcoming presidency in the US could derail the group’s plan to retake leadership on global oil pricing in the medium term. A large-enough surge in US production could completely neutralize the impact of the OPEC-led reductions.

“The days of $1 fuel are certainly over. essentially around Christmas is when you will see the impact from these price increases”, he said. But with few significant oil discoveries in Western Indonesia in the past 10 years, production has fallen to roughly half that as old fields have matured and died.

“The consumer isn’t really focused on gasoline since prices remain low”.

Following the announcements, the price for Brent crude futures, the worldwide benchmark for oil prices, shot up over 10 per cent from below $50 on Wednesday to $51.92 per barrel at 0256 GMT.

“Unlike in the past OPEC decisions, if prices move to around US$60, a substantial amount of oil in United states is ready to come to the markets”, Birol said. The group’s deal to curb production by 1.2 million barrels a day was broader than expected, with Russian Federation nodding to unprecedented cuts. He said oil could rise to $55 per barrel. “The focus now shifts to USA producers, which we think will try to fill the gap”. McTeague explained that, whatever the price of oil is internationally, that price will be immediately passed on to motorists.

Since the announcement, the cost of a barrel of crude oil has jumped 9 percent.