Oil prices rose early on Friday, headed for a fifth week of gains, after OPEC+ managed to seal a compromise deal over its oil production policy early next year, presenting a united front of a unanimous decision after days of disagreements.
As of 8:51 a.m. ET on Friday, WTI Crude was up by 1.03 percent at $46.06, and Brent Crude was nearing the $50 a barrel mark, up 1.13 percent on the day at $49.25.
After days of debates, OPEC+ decided on Thursday that the group would add in 500,000 barrels per day (bpd) in January to its oil production quotas, which currently calls for a production cut of 7.7 million bpd. The total production cut in January will now be 7.2 million bpd. Future assigned quotas could rise or fall, and to determine those levels of oil production beyond January, OPEC+ ministers will hold additional meetings—one each month.
Although the OPEC+ group failed the deliver the most widely expected outcome—a three-month extension of the current level of cuts, the fact that the alliance managed to exit this week’s meeting whole and with some sort of a decision reassured the market that neither the alliance nor the cartel would be breaking, at least for the next month or so.
“With the expected vaccine driven recovery in global fuel demand, this deal will go a long way to ensure the price of oil remains supported until it can stand on its own feet without support. Brent is likely to print $50/b sooner rather than later with already strong Asian demand eventually being joined by others once the Covid-19 cloud lifts,” John Hardy, Head of FX Strategy at Saxo Bank, said on Friday.
“While the deal does fall slightly short of expectations, importantly it does look more certain that the oil market will be in deficit over the first quarter of next year, and so the market should continue to draw down inventories,” said Warren Patterson, Head of Commodities Strategy at ING.