After OPEC deal, Texas oil regulator boasts of victory

Opec last year's intervention led to improvement in the oil price that in turn incentivised United States shale producers to ramp up production. Investors hope that oil producers would be a step ahead.

Malaysia has pledged to cut its oil production by 20,000 barrels per day following a decision by the Organisation of the Petroleum Exporting Countries (OPEC).

The deal agreed past year saw the group's member countries reduce production by 1.2 million barrels a day to 32.5 million barrels, effective from January, and it has succeeded in pushing prices back above the $50 benchmark.

Oil's earlier price decline, which started in 2014, forced Russian Federation and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

Extension of production cuts by 1.8 millions barrel per day (mbpd) for next nine month was well factored in as prices had already gained by about 18 per cent from May's low of $43.8.

"A nine-month extension would have little impact on our price forecast for 2017, which is for an annual average of $55 per barrel for Brent", the report read.

The long-term trajectory for the price of oil seems, at this point in time, to be relatively flat.

You see, American shale oil is expensive to produce, but when oil prices rise, like they did after November 30, this shale oil becomes much more profitable.

Year to date, USO has added more than $125 million in new assets, but there are some signs traders are growing exhausted of the fund from the long side as USO lost almost $15 million in assets since the start of the current quarter. Beyond bloated inventories, one of the main reasons markets have not tightened more has been US oil production, which has soared more than 10 percent since mid-2016 to 9.3 million bpd.

According to Platts, OPEC sources had indicated that Libya will be granted its exemption in the extended deal, as militant activity and general political instability have caused its oil output to fluctuate considerably.

The real problem is that OPEC's oil cap wasn't cutting into global oil inventories quickly enough.

That's why OPEC has agreed to extend its cut even further...

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