OPEC Becomes Relevant Again, Chesapeake Energy, Chevron to Benefit

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Analyst expects Russia to comply with the agreement and contribute toward the planned oil cut

The start of the new year marks the implementation of Oil Producing and Exporting Countries agreement to cut oil supply. This is expected by various analysts to make OPEC relevant again in the oil market. Energy giants including Chesapeake Energy Corporation (NYSE:CHK) and Chevron Corporation (NYSE:CVX) are likely to benefit from this development.

The year 2017 is supposed to mark the revival of oil prices to new heights. The OPEC’s decision to cut oil supply has led oil prices to rise to over $50 a barrel. It is being expected by investors that the prices will cross the $100/per barrel mark. However, some analysts have also estimated that oil prices might just be able to reach the $60/per barrel mark in the first six months of the new year.

The OPEC announced last year that it would cut oil supply by over 1.8 million barrels a day from this year. Many investors were sceptical about this move. Past records have suggested that these cuts are only met with 60-80% compliance. It has been also covered in our earlier articles that the sentiment on the deal suggests it would fail in the first six months of the year.

Virendra Chauhan, an analyst at Energy Aspects, expects an 80% compliance rate on the agreement. She also added that non-OPEC producer Russia will keep its commitment as it expects oil prices to rise.

Since the deal was announced in November last year, oil prices have risen considerably. The volatility in prices has also increased. As of 4:57 AM ET today, the price of WTI Crude depicted a 2.49% increase as it stood at $55.06 per barrel. Similarly, the Brent Crude price has risen 2.41% as well, as it is reported to stand at $58.19/barrel.

Chesapeake Energy shares closed at $7.02 Friday, losing 1.96% of their value. Chevron Corporation stock also dipped 0.10 to close at $117.70.

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