Following last week’s move by the Organization of Petroleum Exporting Countries (OPEC) to cut oil production by 1.2 million barrels per day (bpd), crude oil prices rose above the $55 per barrel mark Monday, hitting a 16-month high, Reuters reports.
By about noon Monday, Brent crude oil rose 49 cents to $54.95 per barrel and West Texas Intermediate (WTI) increased to $51.91 per barrel, a 23-cent jump, and both the highest gains since July 2015.
Reuters reports that non-OPEC producers, like Russia, are expected to cut an additional 600,000 bpd on Saturday, which should also boost oil prices.
But according to MarketWatch, despite the 2% cut in global oil production, big oil companies like Chevron and Exxon experienced only slight gains of between 1 and 3% in stock prices over the past few days, which MarketWatch attributes to an ongoing secular decline, due to supply and demand trends.
The U.S. took the top spot in oil production in 2014, after about a decade of increased production – from just under 5.1 million bpd in 2006 to 9.4 million bpd in 2015 – an 84% increase. And the 2% cut by OPEC is only about a fifth of U.S. Production, MarketWatch reports, so U.S. production will likely continue to increase. At the same time, oil demand has dropped due in part to a focus on cleaner energy sources.
While Big Oil isn’t going anywhere, MarketWatch reports that it isn’t likely there will be much improvement in the major oil producers’ share prices, even if oil prices remain above the $50 per barrel mark.
And The Guardian reports that oil prices will likely cap out at $60 per barrel.