Oil prices have rebounded since OPEC refused to cut output in 2014

Oil prices have come full circle from a historic implosion 3½ years ago sparked by OPEC’s decision on Thanksgiving Day to take a hands-off approach to a global supply glut.

Brent crude, the international benchmark for oil prices, ended Monday’s session at $78.23 barrel, the highest closing level since Nov. 25, 2014. On Tuesday, the contract took aim at $80 a barrel, striking a new 3½-year intraday high at $79.47.

At those levels, Brent was trading solidly above levels last seen prior to Nov. 27, 2014, the day OPEC refused to tackle oversupply in the oil market by agreeing to cap its production.

However, in a sign the market could struggle to maintain those levels, oil prices fell sharply on Tuesday morning, losing about $1 a barrel from the day’s highs as U.S. stock markets slumped.

Brent crude 5-year performance, source: Factset

Until the November 2014 OPEC meeting, oil prices had slid about 30 percent from multiyear highs over the course of five months. OPEC’s decision that year supercharged the sell-off, with Brent prices dropping from $77.75 the day before the meeting to $70.15 the day after.

OPEC and top oil exporter Saudi Arabia had wagered that low oil prices would force U.S. shale drillers to throttle back production. Shale drillers use expensive methods to squeeze oil and gas from rock formations in parts of the United States.

However, OPEC miscalculated, and Brent ultimately fell as low as $27.10 per barrel in January 2016. That persuaded OPEC to work with Russia and several other producers to take 1.8 million barrels a day off the market beginning in 2017.

That deal has helped boost prices back to where they were prior to OPEC’s fateful decision. The price recovery has exceeded expectations thanks to robust oil demand; an economic crisis that has tanked Venezuela’s production; and renewed U.S. sanctions on Iran, OPEC’s third-largest producer, by President Donald Trump.