Opec deal no certainty

30 September, 2016

The oil price has continued to climb today, following on From yesterday’s gains after Opec agreed to production cuts in order to stabilize the price of oil.

At 9.14pm (GMT) crude oil was trading at $47.72c a barrel up from $47.01c in yesterday’s trading.

In a huge surprise to the market, members of the Opec cartel agreed to cut production by as much as 700,000 barrels a day with some predicting that this may be the start of a new upward trend for oil.

 “This could well be a significant turning point. Though the detail is to be worked through, the support from Opec will likely give more confidence to investors on medium to long-term prices, something that has been very much lacking over the last two years.” noted Michael Burns, an oil and gas partner at Ashurst law firm.

Others however see a long road ahead implementing the deal noting that previous agreements to cut production had fallen apart or some Opec members had found ways to bypass the output freeze.

There is also the threat from US drillers and especially if Trump becomes president as he has promised to make it easier to obtain land for new oil explorations that includes fracking which is limited at the moment.

“There is a lot of work that has to be done and the agreement could fall apart quite quickly. US shale is not going to go away and arguably Opec has made things worse because the companies that have survived are better placed for when the oil price goes up.” said Dougie Youngson, an analyst at the stockbroker Finncap.


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