Abu Dhabi: An agreement to cut oil production reached between Opec and its allies is set to take effect this week, amid falling oil prices.

From more than $85 (Dh312) per barrel in early October Brent crude plunged to $50 per barrel last week, driven largely by over production and weak demand, and was trading slightly above $53 per barrel, up by 0.91 per cent when markets closed on Friday.

US crude West Texas Intermediate was at $45.33 per barrel, up by 1.61 per cent.

“At the moment oil prices have very little confidence that the Opec production cuts are enough to balance markets or help draw down on inventories,” said Edward Bell, commodity analyst at Emirates NBD adding that communication from Opec ministers hasn’t been as forthright or committed as it was when they announced production cuts in 2016 and enforced them in 2017-18.

“With that in mind oil prices are likely to remain soft as the production cuts take effect and it won’t be evident if they are having an impact for at least several months.”

Oil producing countries including Opec (Organisation of the Petroleum Exporting Countries) members and non-Opec members like Russia reached an agreement earlier this month to cut output by 1.2 million barrels per day to support prices and rebalance oil markets from January 1 for six months. Despite the announcement of the accord on December 7, oil prices haven’t gone up as expected and fell to their lowest in a year and a half earlier last week due to increase in production from different countries like Saudi Arabia, US, Russia and other countries.

But, analysts expect oil prices to rebound in the first quarter of 2019 due to various factors including rise in demand as well as the full implementation of production cut agreement.

“Oil prices are set to rebound in Q1 2019 as the slump since October has been exaggerated and is not representative of where global demand and supply is found to be,” said John Sfakianakis, chief economist of the Gulf Research Centre based in Jeddah, Saudi Arabia.

He also said Opec+ will take action very quickly if oil prices fall further.

At a conference in Kuwait last week, UAE energy minister Suhail Al Mazroui said Opec and its allies will consider deeper cuts if a 1.2 million barrels per day reduction isn’t enough to balance the market.

He also said extending the agreement signed in early December will not be a problem and the group will even consider holding an extraordinary meeting to take stock of the situation and find solutions.