Why OPEC’s Output Cuts Haven’t Got Oil Bulls Excited Yet

OPEC President UAE Energy Minister Suhail al-Mazrouei (C) speaks as he sits with Minister of Energy of Russia Alexander Novak (left) and OPEC Secretary General Mohammed Sanusi Barkindo (r) of Nigeria during a meeting at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) with OPEC members and non-OPEC members in Vienna, Austria on Dec. 7, 2018. (Photo by JOE KLAMAR / AFP) Photo credit should read JOE KLAMAR/AFP/Getty Images

OPEC and its allies defied market expectations last week and agreed 1.2 million barrels a day of production cuts for 2019, but crude prices are yet to rally.

Unlike when a deal was reached to cut supply in 2016, the market is more skeptical this time around about exactly how the Organization of Petroleum Exporting Countries can go about supporting prices. That’s despite Saudi Arabia’s energy minister Khalid Al-Falih announcing Dec. 7 that 900,000 barrels a day of the kingdom’s crude will be taken out of the market between November and January, in addition to cuts from OPEC’s allies.