Crude oil prices surged extensively on Wednesday following the announcement of a production cut deal. OPEC producers agreed to cut their production around 32.5 million barrels a day from their current level of 33.7 million barrels. Following a deal, crude oil prices experienced one of the biggest rallies, as traders hoped that a production cut deal would aid crude oil prices and stabilizes global supplies.
Despite several doubts, the Organization of the Petroleum Exporting Countries surprised several bearish investors by reaching a big output cut deal, thanks to a strong cooperation by Saudi Arabia, UAE, Iraq, and Kuwait for taking the burden of larger cuts.
Brent crude oil prices surged 8.10% to settle at around $51.47 a barrel for the first time this month, while U.S. crude gained 8.3% to settle below $49.00 a barrel.
Some traders and analysts are raising their concerns that the deal will not be enough to curb global supplies. They are still unconvinced over the time frame of the agreement and the enforcement of production quotas. However, bullish investors are anticipating crude oil demand and supply to make equilibrium after a production cut deal.
On the other hand, OPEC members are now looking to non-OPEC members, including Russia, to make a cut of 600,000 barrels in their production to prop up crude oil prices. It is highly likely that Russia and other members will take part in the production deal, as Russia was the key player behind the OPEC output cut.
In addition, the threat of U.S production could also negatively impact crude oil prices in the coming days, as U.S. producers have set solid footholds for potential growth. Crude oil prices extended their rally in Asian trade on Thursday on the back of production deal optimism. WTI surged $0.29 cents from the recent settlement, while Brent crude gained $0.36 cents in early Asian trade on Thursday.