Oil prices reached their highest levels since October on 22nd November, as the market was buoyed by the anticipation of a cut in oil output, led by the Organisation of Petroleum Exporting Countries (OPEC).
However, analysts cautioned that a failure to agree on proposed cuts could result in a bigger supply glut by the beginning of 2017.
On the morning of Tuesday 22nd November, International Brent Crude was trading at highs of $49.63 per barrel, a rise of 1.5% from the previous settlement, and the highest amount since the last day of October, although it fell back to $49.22 by 07:35 GMT – an improvement on last settlement of 0.65%.
Meanwhile, U.S West Texas Intermediate crude future rose by 35 cents to $48.59 per barrel, equating to a 0.73% rise.
OPEC is attempting to reach a deal with its 14 member states and Russia, which is a non-OPEC producer, by November 30th to set in motion a co-ordinated cut in reproduction. This will prop up the oil market by bringing production levels into line with current consumption levels.
Speaking to Reuters on Tuesday 22nd November, ANZ bank said:
“With investors becoming more optimistic about OPEC reaching an agreement on production cuts, oil prices should continue to edge higher.”
Whilst RBC Capital Markets said:
“The single most important country in OPEC, Saudi Arabia, wants it (a production cut)… OPEC’s leadership is cognizant of the risks posed by failing to reach a deal.”