After the information that OPEC countries for the first time in 8 years agreed to reduce oil production, oil prices have increased by about 5%. Yesterday's closing spot price of crude oil Brent was at the level of 48.75 per barrel. At ICE Futures November futures for crude oil Brent rose by 0.02% to 48.7 per barrel.
The price of oil was also supported by the news that the commercial oil reserves in the U.S. for the week fell by 1.882 million barrels.
However, at the Asian session on Thursday investors are taking profit after yesterday's rapid rise in price and oil price has dropped.
Market participants still do not believe that OPEC can adopt drastic measures. As far as it is known it is expected that oil production will be reduced to 32.5-33 million barrels a day, as against 33.2 million barrels in August. The agreement is not yet final, and the members of OPEC decided to wait until November before the final plan will be adopted.
Moreover, even if the agreement to reduce production will be reached, it does not guarantee yet that OPEC countries will fulfill it. OPEC countries have violated production quotas before.
The reduction of 200 000-700 000 barrels a day is also insufficient in order to decrease oversupply of oil in the world.
Iran, Libya and Nigeria will try to postpone production cuts, until their oil production has not reached the peak levels.
Note also that even minor reduction of oil production within OPEC will be immediately offset by other oil producers, particularly in the USA, where the number of active oil rigs has been constantly increasing. Now, their number is 418.
On Friday at 20:00 (GMT+3) a report of the oilfield services company Baker Hughes on the number of active drilling rigs in the United States will be released. It is possible that their number will increase again, as has been the case for the past 9 weeks in a row.
Therefore, downtrend can resume due to uncertainty, the lack of actions by OPEC and increasing number of active drilling rigs in the U.S. and yesterday's sharp rise in oil prices gave traders a good chance to open short positions.