5% Increase in Oil Prices

On Monday, December 12, the price of oil in global markets increased by nearly 5%. Currently, the price of North Sea Brent crude is close to $57, and U.S. oil is about $54. This significant increase in oil prices comes after non-OPEC countries agreed on Saturday, December 10, to reduce their daily production by 558,000 barrels. On November 30, OPEC members also decided to cut their production by 1.2 million barrels per day; this decision, combined with the agreement from non-OPEC countries, will result in a total reduction of 1.76 million barrels per day in global oil production. These agreements will be implemented starting January of this year. The OPEC and non-OPEC agreement has led to an increase of over 15% in oil prices over the past 12 days. In this context, the American financial services and banking company Goldman Sachs told Reuters that the OPEC and non-OPEC countries' decision to significantly reduce oil production has set the outlook for stabilizing Brent oil prices around $55 for the first half of 2017. The price of Brent averaged about $43 in the first 11 months of 2016. Goldman Sachs stated that if global oil production is fully executed as agreed, the price of Brent oil could average $61 in the first half of next year. In this regard, a Bloomberg report citing global financial sources also predicts that oil prices could peak at $60 in the coming days and reach $70 in the first half of next year. Global oil prices fell from about $110 in the first half of 2014 to below $30 in January of this year due to a global economic recession and increased excess oil production, but have since seen some recovery. Additionally, according to a report on Monday from the OPEC Affairs Management and Energy Assembly Relations of Iran's Ministry of Oil, the average price of Iran's heavy oil during the first 11 months of 2016 was about $38.14, and the price of Iran's light oil was $40.12.