Oil Prices 2016: After Brent Crude Rally, OPEC Rumors, What’s Next?

As oil prices continued to rally Monday amid speculation that OPEC would act to limit output, oil producers around the world looked to the next steps to be taken. While many producers have been lobbying for an OPEC production cut for months, a cap alone may not be enough to solve the industry’s problems, according to commodities experts.

“We continue to believe that if prices were to be artificially supported with production cuts, it would only give more-expensive forms of production more room to breathe and would only solve the problem in the short term,” Malaysia-based Phillip Futures said in a note quoted by Reuters.

Monday, global benchmark Brent crude climbed to $44.82 per barrel, up 46 cents, while the U.S. benchmark oil futures contract rose to $30.02 per barrel, up 58 cents from Friday’s close. U.S. oil had changed hands at prices below $27 per barrel at times in 2016, some of the lowest prices seen in 12 years.

Crude prices have been dropping since mid-2014, with the worldwide oil supply having increased because of the shale boom in the U.S. and high production in the Middle East. Meanwhile, demand, particularly in emerging markets, has decreased, causing prices to plummet.

OPEC has refused to cut production despite the glut, arguing that prices would level out on their own. The cartel has begun to reconsider its stance, according to Emmanuel Ibe Kachikwu, the Nigerian oil minister.

“Have we got to the point where we can say there is a definite strategy? In terms of production reduction or freezing, no, I don’t think we have got there. But there is a lot of energy [behind the idea],” Kachikwu told Reuters.

Any OPEC output cap likely would need to be accompanied by the cooperation of major oil-producing countries outside the organization, including Russia. Moscow has not directly discussed production cuts with the cartel, but it has talked about them with individual members of the organization, Reuters reported, citing the Interfax news agency.