How Much Will Oil Prices Go Up In 2017? OPEC Members Commit To Cuts While Others Appear To Cheat

With oil market indicators showing prices per barrel not seen since the summer of 2015, consumers may worry that filling up the gas tank could soon make a dent in their wallets. While such concerns aren’t totally unfounded, they may be a bit exaggerated, according to experts.

The Organization of Petroleum Exporting Countries’ Nov. 30 decision to cut its collective oil production by 1.2 million barrels per day, or 4 percent, to 32.5 million has sent Brent crude, an international benchmark, soaring nearly 20 percent, to more than $56 per barrel as of Wednesday from around $47 in mid-November. West Texas Intermediate, a U.S. benchmark, rose nearly 25 percent, to nearly $54 per barrel from around $43 over the same period. The cartel's move was an attempt to normalize prices after two and a half years of significant declines, from more than $100 per barrel for both Brent and WTI in mid-2014.

OPEC’s deal won’t even take effect until Sunday, Reuters reported. Already, not only have OPEC members Saudi Arabia, Qatar, Kuwait and Abu Dhabi signaled their commitment to production cuts, but non-members like Russia, Kazakhstan, Azerbaijan, Mexico and, most recently, Venezuela have as well.

Still, the output cut may be all talk and no action. As the Wall Street Journal noted, of the 17 times the cartel has promised to cap production over the past three and a half decades, members have lowered output by only 60 percent of their pledged cuts.

“If compliance is typical, then the actual cut would be a fraction of what was agreed to,” Journal editor Spencer Jakab wrote in a Dec. 23 column.

Some members have already maintained the longtime tradition of cheating, a move that could render the agreement worthless, as an influx of supply by one member into the market could drive down the price by meeting or exceeding importers’ demand. On Wednesday, for instance, Asian imports of oil from Iran, an OPEC member, more than doubled that of last year for the second consecutive month, Reuters reported. Earlier in December, Iraq increased sales of the commodity to China, India and the U.S., and even expanded a contract with a major Chinese refiner.

On Jan. 13, a compliance committee consisting of five representatives from both OPEC and non-OPEC nations will convene in Abu Dhabi to discuss ways of maintaining the Nov. 30 agreement. Whether the nations will effectively comply, and send oil prices up in the process, remains unclear.