Oil Prices Jump As OPEC Production Limits Have Desired Effect09/29/2016
The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it would limit crude oil production and seek cooperation from non-OPEC countries to also curb output in a bid to raise prices.
The mere mention of an agreement by members was enough to push prices up 6% yesterday.
The group said it will limit crude output to between 32.5 million and 33 million barrels a day “in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.”
The stock overhang, as OPEC calls it, is a glut of oil that’s been weighing on prices for about the past year. Crude futures that neared $115 a barrel three years ago earlier this year fell below $30 a barrel, having a profound effect on the economies of several OPEC countries.
Members decided at their meeting in Algiers yesterday that it was time to do something, though prices have rebounded this year and, prior to the announcement, had risen to about $45 a barrel.
Users of gas, which is just about everybody in the U.S., can expect to see higher gas prices if more producing countries decide to follow OPEC’s suit and limit output.
Still, it seems the sky isn’t falling, as U.S. futures overnight were down 0.1% and Brent crude, the global standard, dropped 0.3%. It remains to be seen if, first, OPEC members abide by the limit, and second, if any other countries will join the group in limited production.