From Bloomberg: OPEC Agrees to First Oil Output Cut in Eight Years
In two days of round-the-clock talks in Algiers, the group agreed to drop production to 32.5 million barrels a day, the delegate said, asking not to be named because the decision isn’t yet public. That’s nearly 750,000 barrels a day less than it pumped in August.
As OPEC agreed to limit its output, Russia smashed a post-Soviet oil-supply record, pumping 11.1 million barrels a day in September, up 400,000 from August, according to preliminary estimates. Russia participated in the Algiers talks, but it’s not party to the OPEC deal.
This graph shows the year-over-year change in WTI based on data from the EIA.
Five times since 1987, oil prices have increased 100% or more YoY. And several times prices have almost fallen in half YoY.
Brent and WTI oil prices are now up about 5% year-over-year.
The second graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).
According to Bloomberg, WTI is at $46.83 per barrel today, and Brent is at $48.41.
Prices really collapsed at the end of 2014 – and then rebounded a little – and then collapsed again at the end of 2015 and in early 2016.
Who knows if this agreement will hold, but it seems likely that oil prices – and eventually gasoline prices – will be up year-over-year at the end of 2016 and no longer a drag on CPI.