Since Christmas Eve, US oil prices have spiked 40%. Thanks to OPEC’s aggressive production cuts.
On Wednesday, Crude’s recovery from last year’s bear market hit another milestone. Also, oil topped $60 a barrel for the first time since November 9.
The dramatic rebound clearly reflects the effectiveness of the strategy implemented by Saudi Arabia-led OPEC. The oil cartel and its allies which includes Russia, agreed to sharp production cuts in response to a supply glut last year formed in part by surging US output.
Matt Smith, the director of commodity research at ClipperData said that the positive sentiment from OPEC’s cuts is outweighing the bearish impact of the US shale boom and they are working.
On Christmas Eve, crude plummeted as low as $42.53 a barrel. Other risky assets which are most notably US stocks have rebounded since then. Though not nearly to the same degree as oil.
On Wednesday, fresh evidence of the impact of OPEC’s strategy arrived. According to a new report from the Energy Information Administration, US commercial crude oil inventories plummeted by 9.6 million barrels last week.
That sudden drawdown sent US oil prices higher and blew away expectations for a tiny build. Brent crude, the global benchmark, gained 0.6% to $68 a barrel. This is the highest level in four months.