Oil price soars as Opec agrees output cut

OPEC will meet with non-OPEC producers on December 9. There is still more supply than demand – the reason oil prices collapsed beginning in mid-2014. OPEC gave up assigning quotas in part because members have ignored them in their quest for petrodollars.

The agreement was reached at a meeting of OPEC ministers in Vienna that was overshadowed by regional geopolitics, with Saudi Arabia and Iran jostling for economic and regional advantages.

Meanwhile, US bank Morgan Stanley said, “Investor skepticism remains on individual countries’ follow-through (on the cut), which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now”.

In Asian equities, Australian stocks were up 0.8 percent and Japan’s Nikkei gained more than 2 percent on a weaker yen to hit an 11-month peak. Sal Guatieri, senior economist at BMO Capital Markets, said oil should rise to an average $53 a barrel next year.

“Now that the deal is official, there is potential for prices to move even higher, based on the rate that oil prices climb”, said Mark Jenkins, spokesman for AAA, in a statement. But if gasoline spikes to $4, “that could be bad”. Brent crude was just below $52.00 a barrel after rallying to a six-week peak of $52.37.

West Texas Intermediate for January delivery was at US$49.48 a barrel, up 4 USA cents, on the New York Mercantile Exchange at 11:27 a.m.in Seoul. According to analysts, OPEC’s deal should see oil prices return above $55 a barrel in the short term.

Gas prices in Central Florida are already climbing from OPEC’s decision Wednesday to cut oil production.

Bonds across the world lost about $2 trillion in market value since the November 8 USA election before they recovered a bit this week, according to Bank of America Merrill Lynch data.

Spot gold prices fell $16.06 or 1.35 percent, to $1,172.28 an ounce. The number of active USA drilling rigs bottomed out at 404 in May and has been rising since, to just below 600 last week.

US 10-year Treasury note yield rose 9 basis points to 2.39 percent, a tad below last week’s 2.42 percent that was the highest since July 2015.

Oil prices also helped the Canadian dollar, which added 0.05 of a USA cent to 74.47 cents US.

He said: “Throughout 2016, oil market players have speculated that OPEC would set a production cap only for the reality of oil over-supply to dampen their enthusiasm”.

Tehran agreed to limit its production to just under 3.8 million barrels per day, nearly the same amount of 2005 before beginning of the sanctions. Prices tumbled 3.9 per cent on Tuesday when scepticism swelled that a deal would get done.