West Texas Intermediate (WTI) crude oil prices held recent gains above $50 this morning, as a cartel of international oil producers — including OPEC nations — prep for an important meeting this weekend.
OPEC and non-OPEC oil producers will gather in Istanbul, Turkey from October 8th through 13th for an informal meeting to discuss exactly how to implement the landmark production cap deal reached in Algiers last week. OPEC members reportedly committed to capping production at between 32.5 million and 33 million barrels a day, which would be an approximate 750K barrel drop from September levels.
The OPEC deal is seen by some as a permanent shift in the oil markets, where oil-rich nations that depend on exports for a large portion of their GDP have finally woken up to the reality of long-term low oil prices.
Similar deals have been attempted in the past, and all of them have fallen apart. That’s understandable, considering the ongoing political squabbles between OPEC and non-OPEC nations. There’s no guarantee the latest deal with stick, either.
While the OPEC pact has put a floor under oil prices for the time being, oil market fundamentals remain historically weak. Crude and gasoline inventories are still very high from a long-term perspective, despite recent drawdowns. And while oil demand is growing at a global level, it isn’t rising nearly quickly enough to keep up with record production.
The United States Oil Fund LP ETF (NYSE:USO) fell $0.03 (-0.26%) to $11.48 per share in premarket trading Friday. Year-to-date, the largest ETF tied to the price of WTI crude oil has gained 4.64%.