One of the best ways to assess, whether the OPEC deal to cut oil production by 1.2 million barrels per day and non-OPEC countries’ commitment to cut production by 0.6 million barrels per day were effective in cutting down the excess supply or not, would be to look at the contango and backwardation in the market, especially after the deal comes into effect next year. While one way to assess would be to keep a close watch on the production data from the OPEC but that would hardly tell us about the impact.

The OPEC deal is a physical supply deal, so the true success of it should be felt in the physical market. The Brent is currently trading at $54.32 per barrel in the February contract, while the cash is trading at $0.4 per barrel discount. So the market is currently in Contango as the physical market remains well supplied and the pricing of the shortage is for the future. However, if the deal successfully reduces the excess in the spot market, we could see backwardation back in the market if not the contango could narrow.