Global oil prices rallied on Friday, as the Organization of Petroleum Exporting Countries (OPEC) along with certain non-OPEC oil producers, decided on a production boost at their meeting in Vienna. U.S. crude posted its biggest percentage gain since November 2016 rising 5.75%.
Commenting on the jump in crude, David Bahnsen, managing partner, and chief investment officer of The Bahnsen Group, told FOX Business’ Stuart Varney during ‘Varney and Company’, that “oil has overcorrected.”
Oil rallied to a 3-1/2 year high in May, but then prices pulled back on rumors that OPEC would boost oil output.
At Friday’s OPEC meeting, an agreement was reached to raise production by around 1 million barrels per day (bpd) from July. The real production increase will be smaller because some of the countries will struggle to return to full quotas while other producers will not be allowed to fill the gap.
According to Dow Jones Newswires, Iran’s oil minister said the effective production increase will be less than 700,000 barrels/day adding that they agreed to 100% compliance to production cuts. Saudi Arabia’s oil minister said “(the) OPEC, non-OPEC production rise will not be above 1 million barrels per day.”
Friday morning, U.S. President Trump took to twitter to voice his thoughts on OPEC oil production.
OPEC and certain non-OPEC oil producers agreed in January 2017 to reduce oil output to help balance the market after a glut of supply caused a steep fall in oil prices.
Now, the oil market has rebalanced while production has plunged in Venezuela due to the country’s economic crisis. Meanwhile, there is the potential for lower supply from Iran as a result of U.S. sanctions.