Are Oil Prices Going Up In 2017? OPEC Deal Exceeding Expectations, Report Finds

RTX32A1Z — OPEC may be following through on its stated objectives to cut production, but it's still vulnerable to the high and growing output of the U.S. oil and gas sector. Above, a pump jack was photographed operating at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma, Sept. 15, 2015. Reuters

Given the more recent history of the Organization of Petroleum Exporting Countries’ often unsuccessful attempts to cut the global supply of oil, many harbored doubts when the cartel reached an agreed-upon goal Nov. 30 to lower output by 1.2 million barrels per day—even when Russia, Mexico, Oman and other non-OPEC states joined in later on, with plans to reduce output by nearly half the cartel’s planned amount.

But those doubts may have proven baseless Tuesday, as OPEC nations collectively drew down their oil output by even more barrels per day than their objective cuts, according to a new Reuters report, which even took into account two exempt member states, destabilized Libya and economically-stagnant Nigeria.

Read: Oil Futures: Russia Won't Join OPEC Despite Price Increase And Market Stability After Production Cut

"OPEC's compliance has been more than anticipated," an unnamed OPEC delegate told the newswire. "For non-OPEC, it is satisfactory and getting better."

As recently as early February, the International Energy Agency pegged the cartel’s compliance rate at 90 percent, with Angola, Qatar, Saudi Arabia and Kuwait leading the cutbacks. In January, the compliance rate stood at 82 percent.

Experts were skeptical of OPEC’s attempt to price-gouge, not only because of members’ tendencies to cheat, but because a rise in the commodity’s price incentivizes the group’s competitors to boost their sales and rake in the benefits of elevated prices, while consequently driving them down again. With its booming shale production and increased drilling, the U.S. stood poised to do just that.

Read: American Gas Giants To Benefit From Rising Oil Prices, Tillerson’s Policies, Experts Say

The Nov. 30 cuts sought to correct for a dramatic mid-2014 drop in oil prices, from over $100 to less than $50, that hasn’t budged too much since. OPEC’s basket price, however, saw a modest rise to $53.13 Monday from $52.91 Friday, according to a Tuesday press release from the cartel on its price indicator.

Meanwhile, Brent crude, an international benchmark, continued a steady rise over the past two weeks, leveling off at about $56 Tuesday. West Texas Intermediate, a U.S. indicator, followed a similar pattern, hitting a high of over $53, a level not seen since early March.