Crude oil price has been on a roll since prices rose to a 9-month high, rising for the fifth consecutive week with support from an OPEC allies’ deal and hopes of another US stimulus. Vaccine optimism supported the expectations of a healthy demand outlook for 2021 as vaccine makers worked on supplying as many doses as possible before the end of December.
Investors piled into oil after OPEC+ managed a production hike without disturbing the bull sentiment. The oil market seems to be taking heart from OPEC’s discipline with production in times like this, agreeing to a 1.5 million barrels per day (mbpd) hike instead of a 2 mbpd jump initially feared.
OPEC+ will assess market conditions on a monthly basis before falling on a higher supply. Under the deal, the maximum the group can ease per month is 500 mbpd. Investors cheered the decision as OPEC+ needed to avoid a taper tantrum, so a small hike in January was acceptable to the Saudis.
A monthly increase of 5,00,000 bpd in January will replace the 1.9 mbpd increases decided earlier. Another positive was Iran’s tacit agreement to go with any deal struck by the OPEC+, though it won’t have an active role given the Trump administration's sanctions against the country.
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