U.S. stock futures are pointing to a slightly higher open on Thursday with crude oil moving higher following yesterday’s OPEC meeting in Vienna, Austria that saw coordinated efforts both within and outside OPEC to help balance oil supply through measured supply cuts for the first time since 2008.
Brent crude is currently trading $1.89 higher and is above $52 a barrel while WTI is gaining $1.82 and is above $ 50 a barrel.
To fulfill the implementation of the Algiers Accord, OPEC members decided yesterday to reduce its production by around 1.2 million barrels per day to bring its ceiling to 32.5 million barrels per day, effective January 1, 2017.
OPEC’s latest production reduction is considerably lower than the 4.2 million barrels a day cut, or approximately a 12 percent of their capacity, which OPEC members pledged in 2008 after their December 2008 meeting contributed towards a large reduction of 2.2 million barrels a day.
The duration of yesterday’s OPEC agreement is for six months but remains extendable for another six months to “take into account prevailing market conditions and prospects.”
The agreement was reached after extensive consultations and understanding reached among important non-OPEC countries, including Russia, that sees them contributing to a reduction of 600,000 barrels a day in oil production.
Non-OPEC supply is expected to contract by 0.8 million barrels per day in 2016 but return to growth of 0.3 million barrels in 2017.
Among OPEC members, Saudi Arabia agreed yesterday to take the largest production reduction with 486,000 barrels a day followed by Iraq with a cut of 210,000 barrels a day, UAE with a pullback of 139,000 barrels a day, and Kuwait with a cut of 131,000.
Iran won’t be faced with productions cuts and Indonesia was pulled out of OPEC.
Higher crude oil prices is good news for U.S. shale producers that will given them more reason to increase output as crude oil prices move closer to $60.00.