Saudi Arabia pledged to cut production to 10.058 million barrels a day under the deal.
However, the uptick in oil prices may prove short-lived. So, bullish momentum in the USA stock market could partially support oil prices. Image source: Getty Images. Russian Federation hasn't cut output as per the agreed terms with February production unchanged from January at 11.1 mbpd.
"An extension is needed to balance the market", one OPEC delegate told Reuters. OPEC members actually exceeded their targeted cuts, partially offsetting a 64% compliance rate among non-members.
Benchmark palm oil futures for June delivery on the Bursa Malaysia Derivatives Exchange were down 0.3 percent at 2,795 ringgit ($630.71) a tonne at the midday break.
The precious metal climbed to a peak of $1,234.06/oz last Thursday in London, while gold-backed exchange traded funds attracted inflows worth $187m. However, it's been all downhill in March. Crude oil inventories have risen by ~50 million barrels in the United States so far this year. SPY is up ~6.2% YTD (year-to-date).
Some of this increase is related to seasonal factors. "They will more likely opt for income and will push to get help from non-OPEC". Nevertheless, the evidence clearly shows that there is no shortage of oil right now. "As such, average oil prices for 2017 are not expected to exceed $60 per barrel". The reality has been quite different.
Oil prices were almost unchanged last week as the Opec and IEA monthly reports gave mixed set of signals.
However, domestic production began to stabilize as oil prices approached the $50-per-barrel mark a year ago.
The International Energy Agency (IEA) has forecast Iran expanding its crude oil production by 400,000 barrels per day to 4.15 million bpd by 2022. For the past few weeks, production has been up on a year-over-year basis for the first time in more than a year.
The bigger headwind to prices is also the re-emergence of shale output. The number of oil rigs drilling in the U.S has been rising at a steady rate. "But preliminary data and analyses do not portend such a development, especially because of a significant slowdown in demand growth in China and India - the two major engines of world oil consumption growth".
Oil companies have dramatically reduced their costs in the past two years or so.
Defying rising sentiment that oil markets remain oversupplied, some analysts say markets will tighten soon, arguing that the Opec-led cuts will start to bite only from next month, just as demand picks up as refineries return from current maintenance outages.