According to analysts from Danske Bank, oil prices will remain highly volatile in the near-term. They expect higher oil prices over the medium term.

Key Quotes:

“Oil prices have risen sharply this week as OPEC on Wednesday said that its members agreed to cut output to around 32.5-33.0m bpd from the current level of 33.2m bpd. We believe that any sustained rise in oil prices is likely to be short-lived.”

“Firstly, the proposed cut would be a small cut in supply (see Chart 1). Secondly, there is a risk that the OPEC countries will actually be cautious about handing market shares back to, for example the US, when the final agreement has to be reached on 30 November at the official OPEC meeting. If the market starts to doubt whether the deal will be carried out, oil prices could quickly reverse.”

“Expect oil prices to stay highly volatile near-term, although moving higher over the medium term.”