On November 30th, OPEC members reached a deal to cut production by 1.2 million barrels per day and non-OPEC members would join in with another 0.6 million barrels per day production cut. The deal was supposed to be nothing short of a miracle, which would put oil market to balance with immediate effect and prices would skyrocket. We have higher oil price compared to before the deal, however, we had nothing that of a rocket, except for on the day of the deal. WTI is currently trading at $49.8 per barrel, compared to $45 per barrel, before the deal.

Even Energy Information Administration (EIA) forecasted that WTI price would average $50.6 per barrel and Brent would average $51.6 per barrel. And the main reason behind that forecast is shale oil from the United States. EIA pose doubts not only on the OPEC deal but says that a higher price would lead to an increased production of shale oil. “The extent to which the announced plans will be carried out and actually reduce supply below levels that would have occurred in their absence remains uncertain. But even if they do, any price rally above $50 per barrel will merely spark a revival in U.S. shale drilling, which will encourage a return to supply growth in U.S. tight oil more quickly than currently expected.”

This basically means that the production cuts from the OPEC, even if it gets realized may not act as a major bullish catalyst for the oil market.