OPEC have agreed to extend production cuts to the end of 2018 as the cartel aim to rebalance the oil market.
Crude oil, the US benchmark, has added 0.4% to its value. The international benchmark, Brent oil, has gained 1.6%, to trade above $64.
While prices have moved above the $60 threshold, the market has yet to fully recover from the crude-crash.
Oil markets had declined in the days running up to the decision, as doubts seeped in over Russia’s commitment to the production curbs. Russian producers are pushing for an exit strategy, which will likely be a running theme throughout next year as OPEC navigate the balance of supply and demand.
Russia’s reservations may not be unwarranted, as oil prices march above $60 an increase of rival supplies from Brazil, Canada and the US could derail OPEC’s efforts.
The revival of the US shale industry is a huge question mark over the market’s outlook. OPEC-led production cuts mean the cartel are forfeiting market share to underpin price. OPEC and its allies are hoping that a wave of US shale doesn’t appear.
Additionally, Russia’s economic framework differs from OPEC’s, including a foreign exchange that is closely co-related to fluctuations in oil prices.
OPEC will review the decision to extend production curbs in June, analysing the changes to prices and revaluating its position. The decision to revisit the cuts will undermine investor confidence as it provides the opportunity to end the cuts sooner.