Oil rally holds after Opec deal as focus shifts to its execution

OPEC recently reached a deal to cut oil production from 33.8 million barrels a day to 32.5 million b/d in an effort to prop up prices.

However, Opec kingpin Saudi Arabia agreeing to an output cut along with Russian Federation, in itself is a big achievement for the oil market, as the decision comes amidst huge political hurdles with Iran and Russian Federation effectively fighting two proxy wars against Saudi Arabia, in Yemen and Syria.

In addition to forming a strategy to cope with rising oil production from non-OPEC members, OPEC’s talks on new quotas have also wrestled with the question of how to handle production in Iran as Saudi Arabia’s top rival emerges from global sanctions.

He also said the deal will help lift global inflation accelerate to a “more healthy rate”, including in the US.

Iran was allowed to boost production slightly from its October level – a major victory for Tehran, which has long argued it needs to regain market share lost under Western sanctions.

Wednesday’s average price of $2.07 per gallon of regular unleaded in Bradenton-Sarasota was 4 cents higher than on Monday, according to AAA.

Non-OPEC Azerbaijan and Kazakhstan have said they might also cut.

OPEC is an intergovernmental organization created in 1960 with an objective to coordinate petroleum prices among the member countries to secure fair and stable prices for petroleum producers.

He noted markets couldn’t really be blamed for the wrong call because the history has shown that OPEC often cannot agree due to a rivalry between Saudi Arabia and Iran. Over the weekend, al-Falid said the global oil market didn’t need a production cut to re-balance over time.

The source gave no further details as two other OPEC sources said debates were continuing on the size of each member country’s cut. The contract surged $4.21, or 9.3 percent, to close at $49.44 a barrel on Wednesday, the biggest one-day gain since February.

Crude futures prices surged more than 10 percent immediately after the OPEC deal.

“It’s pretty much a no-brainer because if the other OPEC countries can’t physically pump more than they already are, then the algebra works and oil stays higher for now”, Cramer said.

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.