Oil exchanged-traded funds (ETFs) gained after lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut that sent oil prices higher on Friday.
OPEC and associated partners agreed to cut 1.2 million barrels per day with OPEC being responsible for 800,000 barrels. The latest production cut came as a surprise to many oil analysts as initial estimates were slated at 1 million barrels per day and 650,000 barrels per day for OPEC.
“Given how much expectations were down played around the outcome of this meeting, this result comes as a welcome surprise,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas. “OPEC has given the oil market a rudder that appeared largely absent yesterday.”
Both WTI and Brent crude were over 4 percent higher, which saw oil-focused ETFs benefit. Three of the largest oil ETFs were higher on Friday–United States Oil (NYSEArca: USO)–up 3.93 percent, SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP)–up 1.89 percent and VanEck Vectors Oil Services ETF (NYSEArca: OIH)–-up 2.12 percent.
Russia, though a non-OPEC member, has emerged as a major player in the negotiations, particularly when discussions got tense between rivals Saudi Arabia and Iran.
“OPEC, or more precisely Saudi Arabia, has been the head honcho of the oil world for nearly six decades; yet these days it seems unable to make a decision without Russia’s blessing, let alone without risking the wrath of the U.S. president,” said Stephen Brennock, an analyst at PVM Oil Associates in London.