Alexander Novak, energy minister for Russia, said his country will cut production by as much as 300,000 bpd during the first half of 2017
The unexpected agreement among Organization of the Petroleum Exporting Countries (OPEC) members to undertake the first production cuts in eight years caused futures to rise 9.3 percent, the biggest gains since February - and some analysts think oil might rise to over $53 in the short term.
Dean Rogers, senior analyst at Kase & Co, said, "I think prices will continue to rally and we could see it move up to that $51.20 and maybe even the $53.60 a barrel level."
Still, some observers disappointed by OPEC's track record of not fulfilling its promises caused critics such as Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, to remark, "OPEC has delivered on its Algiers goal to achieve a collective cut, but as always the devil is in the details.
International Energy Agency
2017 could be another year of relentless global supply growth similar to that seen in 2016
"What are the baselines of the cuts and the perennial issue of execution risk looms large, furthermore, despite hopes for non-OPEC participation, the historical track record has been dismal."
According to an OPEC press release, Saudi Arabia will reduce output by 486,000 barrels per day (bpd) from October to 10.058 million; Iraq, the cartel's second-largest producer, has agreed to cut production by 210,000 bpd; and Iran has agreed to cap rather than cut production.
In total, OPEC has agreed to cut production by about 1.2 million bpd, or 4.5 percent of current production, to 32 million bpd; it is also seeking to secure 600,000 bpd of cuts from non-member producers.
Meanwhile, Alexander Novak, energy minister for Russia, said his country will cut production by as much as 300,000 bpd during the first half of 2017.
But moving forward, Stewart Glickman, head of energy research at S&P Capital IQ, said the challenge will be two-fold: "First we will be looking to see what compliance will be, and then we'll have to see if U.S. producers step up and fill the gap left by the cut; U.S. producers have become a lot more efficient over the past two years. "
JPMorgan cautions that the deal is aimed at preventing an even larger buildup of oil stockpiles rather than reducing the current inventory, and it points out that accommodation made to Iran, Libya, and Nigeria under the agreement will likely result in total production increasing in 2017, even as other members undertake cuts in the first part of the year.
The International Energy Agency is also mindful of what could transpire next year, noting that Russia is still projected overall to increase its crude output by 230,000 bpd in total, and Brazil, Canada, and Kazakhstan's contribution to global inventory is expected to push total non-OPEC output growth to 500,000 bpd in 2017, compared with a projected decline of 900,000 barrels a day this year.
The IEA stated, "This means that 2017 could be another year of relentless global supply growth similar to that seen in 2016."
Just a day prior to Wednesday's breakthrough summit, even the most ardent deal supporters believed that the OPEC agreement had devolved from being a sure thing into something that needed rescuing at the 11th hour.