OPEC: bullish for oil prices, even more so for oil shares

Before Wednesday’s meeting in Vienna, Saudi Arabia’s energy minister said OPEC would ask non-members to also cut production.

“We have been able to reach an agreement”.

Though OPEC’s decision jolted global oil markets, some analysts were skeptical whether the organization’s members and nonmembers, such as Russian Federation – the world’s second largest producer – will stick to the agreement for long.

Still, traders said the market was optimistic about Wednesday’s historic OPEC-Russia deal to reduce global output and help bring the oil market back into balance.

On the breakdown of the Opec output cut, Public Investment Bank said Saudi Arabia would lead the way in cutting nearly 500,000 bpd, followed by Iraq (210,000 bpd), United Arab Emirates (139,000 bpd) and Kuwait (131,000 bpd). Iran, which lost market share under Western sanctions, was allowed to slightly boost its production.

In Asia, OPEC’s biggest customer region, oil importers made clear that they would not be happy with an artificial supply cut that hikes prices, and that in case of a cut they would seek more supplies from outside OPEC.

But OPEC president Mohammed Bin Saleh Al-Sada said it’s a temporary measure.

“OPEC has delivered an agreement”.

“If oil prices traded in the range of $50-$60, shale isn’t likely to return in massive levels, however if prices spiked above $60 then the shales industry will return as a major player to rebalance prices”, said Sayed in the note to clients.

The accord comes into effect at the start of next year and is to last for six months.

This year, the price dipped below 30 USA dollars a barrel. We don’t know, but what we do know is that wholesale gasoline prices all across the country went up today from 8 to 11 cents a gallon.

Shale oil producers primarily refer to producers of oil from shale rock formations in the U.S., which was made economically viable thanks to drilling technology breakthrough in recent years. We’ve got to watch the situation fairly carefully.

The EIA (U.S. Energy Information Administration) reported that USA crude oil inventories fell by 884,000 barrels to 488.1 MMbbls (million barrels) from November 18-25, 2016. “If we see it marching higher towards $60 and above their will be an implication for motorists”.