Yesterday saw oil prices reach their highest level in a year, while trading volumes on oil for February and March delivery hit record levels. Brent Crude was up a little under 4% to $54 a barrel at one point and WTI also gained 3.3% to $51.06. The fact that Russia has agreed to join the deal, the first such co-operation between OPEC and the Kremlin in 15-years, as well as other major non-OPEC exporters such as Azerbaijan announcing their readiness to follow suite, has added to the positivity surrounding the agreement.
Today has seen a slight dip for oil and Brent Crude has consolidated at around the $53.5 level in Friday morning trading. Where oil prices go from here will largely be dictated by concrete developments on the implementation of the agreed output reduction. There is still a degree of scepticism as to how quickly and effectively the theoretical pact will be put into place and market participants will want to begin to see evidence that output is actually falling if oil prices are to move consistently beyond $55.
While many market analysts are now predicting $60 a barrel over 2017, others are sounding a note of caution. How many non-OPEC members agree to cut production is the key element to the ongoing stability of higher oil prices. A number of industry experts are cautious as to how realistic keeping prices above $50 is over the longer term. The concern is that oil prices in the $55 to $60 band will lead to increased production by U.S. shale producers and from less cost-efficient areas like the North Sea, increasing supply and pulling prices back down below $50 again before the end of 2017.
Base metals rebounded yesterday but dropped again today and were averaging a 0.8% loss on the LME this morning. Copper price is down 0.7%, zinc 1.9% and lead 1.4%.
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