Oil prices have come full circle via a historic implosion 3½ years ago sparked by OPEC’s decision on Thanksgiving Day to take a hands-off approach to a global supply glut.
Brent crude, the international benchmark for oil prices, ended Monday’s session at $78.23 barrel, the highest closing level since Nov. 25, 2014. On Tuesday, the contract took aim at $80 a barrel, striking a fresh 3½-year intraday high at $79.47.
At those levels, Brent was trading solidly above levels last seen prior to Nov. 27, 2014, the day OPEC refused to tackle oversupply from the oil market by agreeing to cap its production.
However, in a sign the market could struggle to maintain those levels, oil prices fell sharply on Tuesday morning, losing about $1 a barrel via the day’s highs as U.S. stock markets slumped.
Brent crude 5-year performance, source: Factset
Until the November 2014 OPEC meeting, oil prices had slid about 30 percent via multiyear highs over the course of a few months. OPEC’s decision that will year supercharged the sell-off, with Brent prices dropping via $77.75 the day before the meeting to $70.15 the day after.
OPEC along with also top oil exporter Saudi Arabia had wagered that will low oil prices would likely force U.S. shale drillers to throttle back production. Shale drillers use expensive methods to squeeze oil along with also gas via rock formations in parts of the United States.
However, OPEC miscalculated, along with also Brent ultimately fell as low as $27.10 per barrel in January 2016. that will persuaded OPEC to work with Russia along with also several some other producers to take 1.8 million barrels a day off the market beginning in 2017.
that will deal has helped boost prices back to where they were prior to OPEC’s fateful decision. The cost recovery has exceeded expectations thanks to robust oil demand; an economic crisis that will has tanked Venezuela’s production; along with also renewed U.S. sanctions on Iran, OPEC’s third-largest producer, by President Donald Trump.