Without a doubt, oil has been the main talking point across all financial markets in the beginning of 2016. The price drop of the famous black liquid have known a very, very steep drop, starting in recent years and continuing up to recent weeks. This drop has inflicted serious damage across multiple other economies, Canada, Japan and south-east Asia to name only a few, and an oil price below $40 a barrel is not going to bring them back anytime soon.
The first signs of improvement have been seen this week, with Russia and Saudi Arabia agreeing to freeze their current oil production. This news hit the markets pretty hard at first, before a deep analysis was made, which highlighted both good news and bad news for oil traders.
The good news is that Russia and Saudi Arabia are two of the largest oil producers worldwide. Even better news is that they managed to agree on something, a feat that hasn’t happened for quite some time now. This could bring hope of new positive developments for oil prices and as well as this agreement being the first of a long list. New commercial measures taken by all industry giants are sure to bring positive developments in the future.
Despite this encouraging news, there are some issues that can’t be overlooked. The fact that other huge oil producers, like Iran and Iraq, didn’t participate in this meeting is worrying and means that the Russian-Saudi freeze won’t impact global markets all that much. Although this freeze will have some positive impact, analysts say that a freeze isn’t nearly enough – a drop in supply of around a million barrels a day might do the trick here.
All in all, there are signs that the OPEC will once again be active in practice, not only on paper, and will give oil prices a good fundamental boost. After almost a year of constant declines, it will certainly come as a breath of fresh air.