The agreement struck by representatives of the Organization of the Petroleum Exporting Countries marked the group's first concerted effort to slash output since 2008 and sent prices surging more than 10% Wednesday. The Auto Club says average prices statewide have increase 8-cents in the last day. "Five months ago it was at similar levels, as indeed it was one month ago", said analysts at AB Bernstein on Friday.
Members of OPEC, which include Saudi Arabia, Iraq and Iran, reached a consensus on Wednesday which should go some way towards reducing a global oversupply of oil which has pushed prices down.
The price of the commodity has fallen by more than half since mid-2014.
Higher prices, however, are likely to cause more United States shale producers to increase production.
It said other key non-Opec producers, including Azerbaijan and Kazakhstan, also planned to reduce production to about 600,000 bpd.
While oil prices have risen more than $4 a barrel since the announcement, the cost of crude still remains about $2 below a recent high in October. "Over the next year the price of $60 per barrel will be dominant", he said, commenting on OPEC's decision to cut production.
The EIA (U.S. Energy Information Administration) reported that USA crude oil inventories fell by 884,000 barrels to 488.1 MMbbls (million barrels) from November 18-25, 2016.
"The market will no longer see a sudden plunge in oil prices", Kiwoom Securities Co market strategist Seo Sang-young said by telephone from Seoul. In addition, crude is the main benchmark for energy prices. This was a victory of sorts for the oil cartel, as they have been pounded by depressed oil prices that ate into the profits from their major revenue earnings segment. The number of active USA drilling rigs bottomed out at 404 in May and has been rising since, to just below 600 last week.
"We remain skeptical that a global balancing of production and demand is likely through at least the first half of 2017, as OPEC agreements are hard to implement and hard to enforce", he said.
Wednesday's landmark decision to cut output by at least 1.2 million barrels per day came after Riyadh and Tehran finally papered over the differences. There are now nearly as many drilling rigs running in the Permian as in the rest of the country combined, including offshore.