The recent OPEC deal to cut global crude supply has been well publicised by now. In our previous post ahead of the 30 Nov OPEC meeting we outlined the possible outcomes, and predicted what impact each outcome would have. Now the dust has settled, how has it really affected the every day heating oil user?
Did OPEC take any action?
In the end, the meeting between the Organization of the Petroleum Exporting Countries was a resounding success for participating members. OPEC agreed to cut production by 1.2 million barrels per day effective from 1 January 2017. Not only this, but they plan to bring non-OPEC producers on board for additional cut of 600,000 barrels per day.
Now that these cuts have come into effect it’s likely the global surplus will be dramatically affected. With the International Energy Agency estimating global supplies exceeded demand by just 300,000 barrels per day in the third quarter, a cut of 1.8 mb/d will swing supply from surplus to deficit.
What was the impact on oil prices?
As word of the likely outcome of the meeting came out, the market reacted. Brent Crude prices increased 7.9% on 29 Nov alone. Whilst there was a slight delay in UK average heating oil prices rising, they followed suit with a 7.2% (2.88ppl) increase in just 3 days.
Oil price trends for 2017 so far
After the initial jump, crude oil prices have become more stable, and have continued to stabilise from 1st January when the cuts came into effect. In short, traders aren’t sure whether global oil supplies will actually reduce, as there are rumblings of increased crude oil production in both North America and Iraq.
If that didn’t complicate things enough – it’s worth keeping in mind the strengthening dollar, aided by the Brexit speech from Theresa May, negatively impacting the UK’s ability to purchase oil at a cheaper price. This would be likely to increase UK heating oil prices further if it continues.
Looking ahead – buy now or buy later?
If you’re thinking about waiting to fill up your tank, just remember any further speculation on crude oil production cuts will likely see prices increase. This, coupled with the strengthening dollar, means filling up your tank early could lead to spending less on your heating oil in the long run.
Our advice? Keep track of crude oil prices. Heating oil prices usually lag behind Brent crude oil prices by a day or so. You can order on BoilerJuice in the evening when the markets are closed, so keeping a close eye on one could lead to you beating the market on the other.