Oil prices have doubled in a year.This is the reason

It’s a good day for OPEC.

Data released by the oil cartel on Monday show that its members are largely in compliance with the agreement to reduce production.

This confirmation concludes a notable year for OPEC, which was forced to devise plans to raise prices after falling to $ 26 a barrel in February 2016.

The price plunge was triggered by months of oversupply, slowing demand from China, and Western decisions to lift Iran’s nuclear sanctions, to levels not seen since 2003.

Since then, the market has seen a surprising turnaround, with oil prices doubling to $ 53.50 a barrel.

Here’s how major oil producers can work together to boost prices:

OPEC Agreement

OPEC agreed in November to cut production significantly in hopes of curbing global oil oversupply and support prices.

News Transactions quickly pushed up prices 9%.

Investors cheered even more after several non-OPEC producers, including Russia, Mexico and Kazakhstan, joined forces to curb supply.

The important thing is that transactions are stagnant. OPEC’s report, released Monday, showed that its members-mostly-had fulfilled their commitment to reduce production.International Energy Agency agrees: it estimated OPEC compliance January is 90%.

United Arab Emirates Energy Minister Suhail Al Mazrouei told CNN Money on Monday that the results were even better than he had expected.

Production will be reduced by a total of 1.8 million barrels per day and will be operational for 6 months.

Related: OPEC has ceased one of its “deepest” production cuts

2016 election market oil up

Investors are bright

OPEC trading takes months to negotiate and investors really like it. According to OPEC, the number of hedge funds and other institutional investors betting on higher prices hit a record in January.

Widespread optimism is driving price increases.

Higher demand

Global oil demand in 2016 was higher than expected, thanks to strong economic growth, increased car sales, and colder weather than expected in the final quarter of this year, according to the latest OPEC and IEA data. rice field.

Demand is expected to increase by an average of 95.8 million barrels per day in 2017, compared to 94.6 million barrels per day in 2016.

The IEA will say that if OPEC sticks to that agreement, the global oil surplus that has plagued the market for three years Finally disappears in 2017..

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What’s next?

Despite the tremendous growth, analysts warn that prices may not be that high.

This is because rising oil prices are likely to bring American shale producers back to the market. According to Baker Hughes data, the total number of active oil rigs in the United States was 591 last week. It’s 152 over a year ago.

According to OPEC’s report, US crude oil reserves exceeded the five-year average by nearly 200 million barrels in January.

Analyst Fiona Cincotta said, “This significant increase in inventories is from US shale producers who have not been involved in the OPEC agreement and instead have taken advantage of the resulting price increases to increase production. It is the result of a strong supply reaction. ” City index.

More supplies could put pressure on OPEC again.

CNNMoney (London) First Edition February 13, 2017: 9:13 AM ET

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