Traders following the equity markets today are likely going to be excited to see oil prices are on the rise again.
There are two main factors for the recent recovery in oil prices that we have observed. Firstly, at their most recent meeting, OPEC member states agreed to cut down their production volumes even more significantly than before. Though the cartel did not discuss extending the production cuts past March 2020, when their current agreement is scheduled to end, investors expect that they would elect to continue it at the next OPEC summit. By keeping production levels low, OPEC hopes to decrease the oil supply on the market and drive prices up.
Secondly, oil prices are rising because of the improvement in the trade relations between the United States and China. The two countries announced they have finished a phase-one trade deal, which is currently being translated, and will be ready for signing in the beginning of January. Investors hope that the deal will offer a boost to global economic growth and pave the way for more trade agreements in the future to help bring an end to the trade war.
If economists observe better economic growth, especially from China, the demand for oil will rise, as it is necessary to fuel industrial activities. Just as a decrease in supply is beneficial for oil prices, so is a rise in demand.
Brent crude reached $67.48, while the WTI brand touched $61.36 earlier in the trading day.
