The next few weeks will give investors an insight into whether the production cuts by OPEC and non-OPEC will be fully implemented and will be a crucial period for prices of the commodity, according to a new monthly report by the IEA (International Energy Agency).
"For contractual and logistical reasons, we might initially see that the output cuts do not fall neatly into place," the Paris-based organization said in the report Tuesday.
"The deal is for six months and we should allow time for it to be implemented before re-assessing our market outlook. Success means the reinforcement of prices and revenue stability for producers after two difficult years; failure risks starting a fourth year of stock builds and a possible return to lower prices," the IEA added.
After several meetings this year, OPEC countries decided to cut production by 1.2 million barrels a day starting in January. Non-OPEC members, such as Russia, joined the efforts earlier this month sending oil prices higher.