OPEC Production Cut Sends Oil Higher

Oil prices soared on Wednesday, with traders remaining optimistic about OPEC’s production cuts which were confirmed last weekend. As of 2:19 p.m. HK/SIN, Brent crude futures were up 1.16 percent to $60.90 per barrel, and U.S. WTI futures were up 1.18 percent to $52.26 per barrel. Also supporting prices was continuing tension in Libya, where local militia seized the El Sharara oil field, the country’s biggest oil field.

Oil prices have been under pressure in recent weeks, losing nearly one third of their value since early October. OPEC’s proposed production cuts, set to begin in January, are aimed not only at stopping prices from falling further, but to sending them higher. Thus far traders’ reactions and confidence in the production cuts have been mixed, due to continually increasing production in the United States which could undermine OPEC’s efforts. The U.S. is expected to end the year as the world’s top oil producer, surpassing Saudi Arabia and Russia who have previously held this title.

Fawad Razaqzada, market analyst at Forex.com, commented about his concerns, saying that “U.S. oil production growth continues relentlessly and will probably continue for the foreseeable future to offset any supply-side adjustments from the OPEC+ group.”

Stock Markets Recover

Also giving a boost to the oil markets was renewed optimism about the trade tensions between the United States and China which could increase exports and the demand for oil. Asian markets were higher on Wednesday after days of losses, with traders once again getting encouraged that progress may be made in thawing the tensions between the U.S. and China. Asian markets were a sea of green on Wednesday afternoon, with Japan’s Nikkei 225 taking the lead, with a 2.15 percent gain. Hong Kong’s Hang Seng Index was up 1.65 percent, South Korea’s Kospi was up 1.44 percent and Australia’s ASX 200 gained 1.39 percent. China’s benchmark indexes were also both higher, though with less enthusiastic results. The Shanghai Composite gained 0.32 percent while the Shenzhen Composite gained 0.38 percent.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.