OPEC's Unlikely Ally: China

OPEC's agreement to collectively lower their oil output was met with skepticism by some, but the organization has found an unlikely ally: China.

Bloomberg cited a research report from analysts at Sanford Bernstein who suggested that China's oil production is expected to decline by up to 7 percent in 2017, which marks a continuation from 2016's decline.

The Bernstein report appears to be consistent with the International Energy Agency's estimates, which call for China's oil output to have declined to 335,000 barrels a day in 2016 and will continue to decline as low as 240,000 barrels this year.

China And Oil

The IEA also noted that oil production in China hit a seven-year low in October 2016; there aren't any projections for notable uptick in activity from the major Chinese companies.

China's reduction in oil output is around the same size as the output cut Iraq, the second largest OPEC member, agreed to as part of its agreement. Accordingly, China's plans to lower its output plays into the hands of OPEC and adds to the bullish story for oil over the coming year.

"China's domestic crude output decline will certainly help OPEC's plan to reduce global supply," Nelson Wang, a Hong Kong-based oil and gas analyst at CLSA told Bloomberg. "Even if that isn't China's intention, it's just the reality that China can't produce more under the current circumstances."