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Will Global Oil Be a Messy Situation?

Mark Vickery

Wednesday, January 4, 2017

Oil prices surprisingly sold off after hitting prices higher than have been seen since the big commodity sell-off began in the summer of 2015. The WTI and Brent reads fell 2.6% and 2.4%, respectively, after getting to the mid-high $50s at the start of the new year. They have since inched back in early Wednesday trading.

The OPEC agreement going into effect is for production cuts of 1.8 million barrels per day. This also includes countries like Russia and Venezuela, and the goal is to reduce output overall by 2%, which would finally manage to gouge the global supply glut.

However, the question some analysts have this week is whether or not the U.S. — not a part of the OPEC agreement — will choose to increase fracking efforts to flood the market with more oil, keeping prices lower and taking share from the companies cutting back. And would such a move cause those in the OPEC agreement to go back on their agreement and start pumping mrs oil themselves?

The next two days sees announcements from major oil bureaus: the API (American Petroleum Institute) later today and EIA (Energy Information Administration) tomorrow. Analysts currently expect the pullback to be noticeably in effect. Meanwhile, it’s natural gas prices’ turn to swoop downward in price: pre-market futures are down another 1% after an 11% drop in Tuesday trading.

Mark Vickery
Senior Editor

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