The oil market might be set to regain its footing earlier than expected as members of the OPEC cut production, according to report from UBS.
Oil production has reduced dramatically since the proposed OPEC’s production cut agreement that was made in November. Countries like Saudi Arabia have reportedly cut production by 160,000 barrels per day, while Kuwait and Qatar have both cut down 20,000 barrels per day.
The rebalancing of the supply and demand in the oil markets was reportedly boosted because of the production cuts that have worked out well. With the market’s supply and demand regaining its pace, the UBS is now leading to revise its forecast from the second quarter of 2017 to the first quarter.
Analyst Jon Rigby stated that “Incorporating the IEA's (International Energy Agency) baseline demand revisions would, all else equal, bring forward our projected rebalancing from 2Q17 to 1Q 17”
Russia is also playing its part in the OPEC cut, according to the country’s energy minister Alexander Novak. He claims that the oil production in Russia has been cut down by two times faster than what was originally planned.
Once the Oil market is balanced and the pace of inventory drawdowns increases, UBS expects the oils prices could rise by $5 to $10 per barrel. The increase in oil prices should stimulate more The U.S. In increasing their Production, which may be crucial on keeping the market in a balanced and steady state.