OPEC has agreed to its first production cut in nearly eight years on Wednesday. Shares of the United States Oil Fund LP (ETF) USO 1.32% are up 8.75 percent in early Wednesday trading in response to the news.
While investors await the official details, Benzinga took a look back at how the USO reacted to the last OPEC cut production way back in 2008.
Unfortunately, an apples-to-apples comparison is difficult given the global economic circumstances at the time.
A Look Back To 2008
OPEC’S last production cut came on December 17, 2008, when the organization slashed production by 2.2 million barrels per day (bpd). The cut was OPEC’s largest in history, and it came in response to oil prices plummeting from well over $100/bbl to around $40/bbl. The 2016 cut is only expected to be in the 0.6 million–1.1 million bpd range.
Unfortunately for oil investors, the aggressive 2008 cut didn’t do much for oil prices in the near term. In the week following the cut, the USO plummeted 16.6 percent. However, December 2008 was the epicenter of the global financial crisis, and the SPDR S&P 500 ETF Trust SPY 0.05%also dropped 4.7 percent in that one-week stretch.
Today, the U.S. economy is firing on all cylinders, and the S&P 500 is near all-time highs.
Of course, patience eventually paid off…
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