Opec Deal Will Support Oil Prices, But Long-Term Cap Remains

Opec Deal Will Support Oil Prices, But Long-Term Cap Remains

On 30 November, the Organization of Petroleum Exporting Countries (Opec) and its non-Opec friends decided to extend the output cuts till the end of 2018.

That this is a positive development for crude oil prices is obvious. Brent prices, though, increased just marginally on 1 December, but the sharp increase in prices (see chart alongside) in the run-up to the Opec meeting suggests that the market was already factoring in a favourable outcome.

Ritesh Jain, chief investment officer at BNP Paribas Asset Management India Pvt. Ltd, says the deal sends a strong signal to the oil markets that the cooperation on supply cut is here to stay and, more importantly, gives the next leg to the increase in oil prices.

“Unless there is a significant increase in shale oil supply, oil prices seem to be on strong footing, for the moment,” added Jain. Read More…

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