The price of crude oil rose back above US$52 when the Oil Producing cartel OPEC lead by Saudi Arabia and non OPEC producers lead by Russia signed an extension to their deal to restrict oil production. Saudi and Russia between them produce 20 million barrels of crude oil per day which amounts to about 20% of global consumption. Under the agreement OPEC would cut by 1.2 million barrels while the non OPEC countries reduce output by 600,000 barrels a day. This latest deal will seek to drain excess crude oil out of the market and hold prices firm.
This deal should stabilise the oil price, however the US is not part of this deal and has refused to cut production and in fact increase by 10% over 2016 levels. American oil production could undermine the deal. In May US oil production reached 9.3 million bpd it’s highest since August 2015 as the number of rigs operating in the US is at its highest level since 2015.
Looking ahead oil prices should hold firm from improving global growth but increasing US oil production and high US crude inventories could hold prices too.