Oil has recently been one of the best-performing commodities. The performances of the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, confirm as much.
Of course, a big reason for the recent bullishness regarding crude is the production cut announced earlier this month by the Organization of Petroleum Exporting Countries (OPEC).
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day. While Saudi Arabia, OPEC’s biggest producer, has agreed to reduce output, Iran, Libya and Nigeria might not follow suit.
In fact, Nigeria, Africa’s largest oil producer, has said it plans to boost output. However, other non-OPEC countries are expected to follow the cartel in reducing production and that could trigger dwindling supplies next year.
“Oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect, said the agency, which had previously assumed inventories wouldn’t drop until the end of 2017. Russia, the biggest producer outside OPEC to join the deal, will gradually implement the full reduction it promised, according to the International Energy Agency (IEA),” reports Grant Smith for Bloomberg.
SEE MORE: Energy ETFs Rally as Russia Joins OPEC in Considering Supply Limits