Oil prices have climbed to an 18-months high. The feat was made on Tuesday which was the market’s first day of trading in 2017.
According to analysts, the high was based on hopes that OPEC and non-OPEC producers would pull through with the cut deal to boost oil prices.
The cut promised by both parties kicked off on Sunday, January 1. Output from OPEC and non-OPEC members will be reduced by almost 1.8 million barrels per day.
Benchmark Brent crude LCOc1 climbed more than 2 percent to a high of $58.37, up $1.55 a barrel and its highest since July 2015. By 0940 GMT (4:40 a.m. ET), Brent eased slightly to trade at $58.22, up $1.40.
“First signals suggest the OPEC and non-OPEC production cuts are raising hopes that the global oil oversupply will diminish,” Hans van Cleef, senior energy economist at ABN AMRO Bank N.V. in Amsterdam told Reuters.
Ric Spooner, chief market analyst at CMC Markets, agreed: “Markets will be looking for anecdotal evidence for production cuts,” he said. “The most likely scenario is OPEC and non-OPEC member countries will be committed to the deal, especially in early stages.”
According to recent reports, Libya, one of two OPEC countries exempted from the output cuts, increased its production to 685,000 bpd, from around 600,000 bpd in December,
In December, Venezuela announced it will cut 95,000 barrels per day (bpd) of oil production starting from this year.
Aside Nigeria, Venezuela is also one of the countries worse affected by a fall in crude revenue since mid-2014.
Also in December, Saudi Arabia promised to cut a large chunk of 10 million barrels per day starting from January.
Non-OPEC Middle Eastern oil producer, Oman, also told customers last week that it would cut its crude oil term allocation volumes by 5 percent in March.
Non-OPEC Russia’s oil production in December remained unchanged at 11.21 million bpd, near a 30-year high, but it was preparing to cut output by 300,000 bpd in the first half of 2017.