The reasons why oil has grown and is it possible to continue

While the OPEC countries are struggling to reach the projected cuts in yield as talked about, their allies outside the organization are going over the promise and cutting it over planned amounts, with Russia leading the way.

On the chart below, OPEC and the allies (the smallest bars with striped bars) see the implementation of the program by months, with the impression that OPEC had an advantage in March and May, while parties outside the organization were overrunning the plan for the first time.

All 21 countries participating in the abatement agreement are trying to reduce their production collectively by almost 1.8m barrels per day, with most of the November 2009 levels being the starting point. Iran is allowed to slightly increase its production while Libya and Nigeria are released. Outside OPEC, Russia is responsible for more than half of the restrictions. On the map and the table below, you can see which countries manage to complete the plan and how much in August:

The OPEC compliance factor has risen to 94% last month from the revised 85% in July, according to Bloomberg calculations from the secondary data for the group. Six of the 12 OPEC members limiting the yield achieved their goals. Some of them, including Saudi Arabia and Angola, have reduced yields with more than necessary.

Here is where each country is facing its plan to cut production:

Despite the efforts and success of producing countries, the price of black gold remains under pressure at levels below $50 a barrel, far from the OPEC target of $57.10. On the chart below, we have compared the production of OPEC to the Brent price, making it clear that even over a month overrun of the abstraction plan leads to a good price increase:

The technical price is located in the horizontal resistance zone after a break in mid-term diagonal. The level is key because we have coincidence of horizontal resistance, a 50% of Fibonacci correction  and 200SMA. Break above these levels will boost positive moods and are more likely to grow.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

Bloomberg: OPEC’s Allies Race Ahead on Output Cuts

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