It’s a good day for OPEC.
Data released Monday by the oil cartel shows that its members have largely complied with the agreement to drastically reduce production.
The confirmation caps a remarkable year for OPEC, which was forced to develop a plan to raise prices after they fell to $26 a barrel in February 2016.
The collapse in prices – to levels not seen since 2003 – was driven by months of growing oversupply, a slowdown in Chinese demand and the decision by Western powers to lift Iranian nuclear sanctions.
Since then, the market has seen a stunning turnaround, with crude prices doubling to trade at $53.50 per barrel.
Here’s how major oil producers worked together to drive up prices:
OPEC agreed to major production cuts in November, hoping to rein in the global oil oversupply and support prices.
News of the deal immediately caused prices to rise by 9%.
Investors cheered even more after several non-OPEC producers, including Russia, Mexico and Kazakhstan, joined efforts to limit supply.
Basically, the deal stuck. The OPEC report released Monday shows that its members have – for the most part – kept their commitments to significantly reduce production. The International Energy Agency agrees: it estimates OPEC’s compliance rate for January to be 90%.
UAE Energy Minister Suhail Al Mazrouei told CNNMoney on Monday that the results were even better than he expected.
Production cuts total 1.8 million barrels per day and are expected to last six months.
Related: OPEC Achieved One of Its Most “Drastic” Production Cuts
The OPEC deal took months to negotiate and investors really like it. The number of hedge funds and other institutional investors betting on higher prices hit a record in January, according to OPEC.
Widespread optimism is helping to fuel rising prices.
The latest data from OPEC and the IEA show that global oil demand was higher than expected in 2016, thanks to stronger economic growth, higher vehicle sales and colder than expected weather in last quarter of the year.
Demand is expected to grow further in 2017 to reach an average of 95.8 million barrels per day, compared to 94.6 million barrels per day in 2016.
The IEA said that if OPEC sticks to its deal, the global oil glut that has plagued markets for three years would finally disappear in 2017.
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Despite this staggering growth, analysts warn that prices may not rise much.
Indeed, rising oil prices are likely to attract American shale producers back into the market. The total number of active oil rigs in the United States stood at 591 as of last week, according to data from Baker Hughes. It was 152 more a year ago.
U.S. crude inventories swelled in January to nearly 200 million barrels above their five-year average, according to the OPEC report.
“This sharp increase in inventories is the result of a strong supply response from U.S. shale producers, who were not involved in the OPEC deal and who instead benefited from the rising prices that came with it. resulted in increasing their production,” said Fiona Cincotta, an analyst at City Index.
Increased supply could once again put OPEC under pressure.
CNNMoney (London) First published February 13, 2017: 9:13 a.m. ET