Extended OPEC Supply Cuts Can Raise Oil Prices by $10

Last week was a difficult spell for oil prices, which dropped to below the $50 a barrel threshold for the first time this year. But the cost of a barrel of oil could jump to $60 by the end of the year, if OPEC countries decide to extend their output cut agreement, an analyst told CNBC.

"We could see West Texas Intermediate go down into the mid-40s but we do still see that rebalancing story intact. Fundamentals haven't changed dramatically this week," said Richard Mallinson, geopolitical analyst at Energy Aspects, CNBC reported.

"If OPEC extends the deal, we see prices above $60 before the end of the year," he added.

Oil prices dropped significantly on Wednesday and Thursday after the US Energy Information Administration said that the country's crude oil inventories rose by 8.2 million barrels last week.

But the main driver for the fall was comments by the Saudi Energy Minister Khalid al-Falih, according to Mallinson.

"I think the immediate trigger was comments by the Saudi Arabia minister. He said that it wasn't guaranteed that OPEC would rollover its production cuts deal to the second half of the year and the market had taken that for granted," Mallinson said.

Last year, OPEC members agreed to cut output by 1.2 million barrels a day starting in January to revamp oil prices. Other oil-producing nations joined a few weeks later, agreeing to remove 558,000 barrels a day of crude oil from the market.

The agreement is in place for the first half of 2017.

In January, OPEC delivered 82% of the promised cuts, according to a Reuters survey and over 90% according to OPEC's own report. The International Energy Agency has said it was impressed with OPEC's compliance, calling it a record level.