Oil Prices 2017: OPEC Leader Still 'Confident' Cartel Will Commit To Output Cuts

Oil prices shot up Thursday from a dip earlier in the week as Mohammad Sanusi Barkindo, the secretary general of the Organization of Petroleum Exporting Countries (OPEC), heightened expectations that the cartel would commit to its Nov. 30 decision to cut output by 1.2 million barrels per day, or 4 percent.

“I remain very confident with what I have seen in the last several months,” Barkindo, of OPEC member state Nigeria, said Thursday at an energy conference in Abu Dhabi, according to the Associated Press. He called the commitment level displayed by both OPEC and non-OPEC member countries to the supply cuts “unparalleled” and declared that there had already been “a high level of compliance,” according to the newswire.

Brent crude, an international benchmark, jumped nearly 2 percent to around $56.10 per barrel Thursday morning, following Monday’s sharp 4 percent decline to less than $55, in what some analysts believed was a mass sell-off. West Texas Intermediate, a U.S. oil price indicator, followed a similar pattern, rising about 1.3 percent to more than $53 Thursday, after a drop of nearly 6 percent between Friday and Tuesday.

Those increases came far from correcting for two and a half years of dropping prices, from more than $100 per barrel for both Brent and WTI in mid-2014.

Another factor lifting prices of the commodity was the news of China’s record car sales—a sign of growing demand from the world’s largest energy consumer—of 28 million vehicles, up 13.7 percent from last year, according to Reuters.

Still, some have doubts as to whether OPEC will follow through. Although the government of Iraq, an OPEC member state, said in a statement that it intended to comply, the country increased sales to refiners in China, India and the U.S. at the end of December. And while Russia has joined other non-OPEC states such as Kazakhstan, Azerbaijan and Mexico in freezing a portion of its output, the country more or less cheated, raising its November output, which would be used as a baseline for deciding on the supply cut, to a nearly three-decade high.

As the Wall Street Journal noted in mid-December, OPEC has a long history of its members cheating by selling higher-than-agreed-upon quantities of oil to take advantage of rising prices associated with other countries’ production cuts. Over the past three and a half decades, the cartel has tried to cap production 17 times, resulting in cuts that amounted to only 60 percent of planned declines in output.