Oil price spiked to $56 per barrel earlier this week amid news that the Organization of the Petroleum Exporting Countries (OPEC) will take steps to fix the supply gut that is keeping prices down worldwide.
Amid the announced measures is slashing the daily output by 1.8 million barrels until March. Experts are confident that the market is finally starting to rebalance.
Saudi Arabia announced that it has trimmed the November output by 560,000 barrels per day, at the OPEC’s request. The United States announced that the output remains put as some units were shut down in the wake of Hurricane Nate.
The international price benchmark for crude oil jumped 32 cents to $56 on Tuesday, while the U.S. oil price jumped 29 cents to $49.87.
OPEC and non-member states like Russia pledged to trim output until next March to fix their oversupply issues. OPEC announced that there are telltale signs that the global market is rebalancing due to the recent measures and a higher-than-anticipated global demand.
Market Is Rebalancing
Analysts confirmed that the market is slowly rebalancing. Even though crude stocks still face an oversupply problem, crude stored in floating containers is being cleared up.
Price increased in the U.S. mainly due to a halt in Gulf of Mexico production caused by Hurricane Nate. The daily output for that region is 1.49 million barrels per day.
Even OPEC is amazed at the success of its cutback efforts this year. It announced that it might expand the deal beyond the March deadline. However, some analysts are concerned that higher prices may entice producers to boost output again.
JP Morgan analysts dismissed those concerns, saying that the OPEC deal would not fail into the fourth quarter as some experts said. The analysts believe that stronger-than-estimated economic growth can help OPEC expand the agreement until the end of the next year.
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