WEEKLY ENERGY RECAP: Five weeks of recovery and five years of cooperation

Oil prices rose for a fifth week as OPEC+ producers approached their fifth year of cooperation.

Brent crude advanced to $49.25 per barrel, the highest level since early March as WTI also gained to $46.26.

Crude was buoyed by a compromise deal ensuring slight production increases starting in the new year.

It means that output cuts are to be eased by 500,000 barrels per day (bpd) in January 2021, with OPEC+ producers agreeing to meet monthly thereafter to determine subsequent quotas. This will help producers keep in lockstep with what may be rapidly changing market conditions over the coming months as so many demand-side variables remain.

It may be inevitable that analysts are now focused on oil breaching the significant $50 barrier, but that overlooks the broader theme of continued cooperation between major producers that is now entering its fifth year.

The strategy has been adapted since April in response to the huge upheaval in oil markets caused by the pandemic. Compliance with agreed cuts has at the same time improved among producers.

A consensus was reached despite rampant analyst gossip suggesting otherwise with the latest accord succinctly highlighting that OPEC+ continues to be defined more by shared goals than differences.

They were able to identify the uncertainties that lie ahead in the coming quarter and adjust their output accordingly in what is a crucial time for the global economy and the fuel that continues to power it.

That said, continued efforts are needed to ensure that cohesion remains intact in what may be a challenging period between now and April 2022 when the agreement expires.

Any short-term oil demand recovery does not necessarily imply a corresponding improvement in fundamentals despite the fact that OPEC producers have successfully slashed oil output to the lowest level since 2002.

Over the medium term, the market needs to see a more tangible impact as the cuts gradually absorb the glut created by demand-sapping lockdowns.

What is now more important than ever is to protect the currently fragile global economy from future turmoil.