OPEC are also set to meet with non-OPEC producers, most notably Russia, in about a week to discuss their output levels as well.Oil prices rose to some of their highest prices of the year Thursday, building on gains made after OPEC struck a long-sought agreement to reduce production by 1.2 million barrels a day.
U.S. crude futures briefly topped their one-year-high of $51.60, hit in October, before settling at $51.06 a barrel on the New York Mercantile Exchange, up $1.62, or 3.28%, from Wednesday’s close. Brent, the global benchmark, gained $2.10, or 4.05%, to $53.94 a barrel—the highest settlement value since August 2015.
The agreement struck by representatives of the Organization of the Petroleum Exporting Countries marked the group’s first concerted effort to slash output since 2008.
Market participants were skeptical in the days leading up to the meeting that major producers would be able to put aside their differences, and the deal caught some by surprise. U.S. crude futures rose more than 9.3% Wednesday.
And questions remain about whether countries will stick to the agreement. But optimism is growing that the cut, representing about 1% of global production, will help to reduce a supply glut that has depressed prices for more than two years.
“Market forces have brought supply and demand back close to balance already. The cuts are more intended to accelerate the rebalancing process and in particular the drawdown of the large inventory overhang,” said Gordon Gray, global head of oil and gas equity research at HSBC.
The group is expected to reassess the effectiveness of the deal in six months.
Crude prices on Friday were pressured by data showing oil output in Russia rose in November to a post-Soviet high and news that Moscow would use its record November oil production as its baseline when it cuts output.
Russia also agreed to cut output by 300,000 bpd. Russia and other non-OPEC producer are set to meet with OPEC on Dec. 9.
"There are still several open questions regarding compliance and the role of so-called 'key non-OPEC countries' in deepening the OPEC cut by a further 600,000 barrels per day (bpd)," JBC Energy said in a note.
In addition to Russia, traders also pointed to Iran as being a wild card.
U.S. President-elect Donald Trump's transition team is examining proposals for new non-nuclear sanctions on Iran, the Financial Times reported on Friday.
Iran also threatened on Friday to retaliate against the U.S. Senate's vote to extend the Iran Sanctions Act (ISA) for 10 years, saying it violated last year's deal with six major powers that curbed its nuclear program.