OPEC+ cuts output, but oil rallies
The much-anticipated OPEC+ ministers’ meeting has taken place and the announcement has been made. The oil producer’s group has agreed to cuts approaching 2 million barrels a day (bpd) for early next year. This means that Saudi Arabia will roll over its current 1 million bpd output cut which has been in place since July, and others in the group will also step up to the plate. This includes Russia which has agreed to reduce production by 500,000 bpd.
Crude oil had been firmer all yesterday morning but suddenly reversed course, dropping by more than $2 per barrel, shortly before the latest inventory update from the US Energy Information Administration. The report showed an unexpectedly large build in inventories, suggesting a sharp slowdown in demand last week. But it didn’t take long for prices to stabilise and rally once again, to end the session firmly in the green. Despite a brief dip overnight in response to weak Chinese data, crude was firmer again this morning as traders positioned themselves ahead of the key announcement from OPEC+ due later today. The ministers’ meeting was originally scheduled for last Sunday but was delayed apparently to a lack of agreement over who should be cutting production and by how much. The expectation was that the group would announce additional cuts to output in a bid to support prices. Some were speculating ahead of the announcement that this could be an additional 1 million barrels per day, on top of the existing 1 million barrel cut from Saudi Arabia. This seems to be broadly in line with what happened. But as is often the case, it’s better to travel than to arrive. Crude fell sharply following the announcement. We’ll see if buyers step in as they did yesterday to take advantage of the dip in prices.
As can be seen from the 4-hour chart above, the positive divergence of the MACD with price did have a bullish resolution. Now we’ll see where support comes in.
Crude oil had been firmer all yesterday morning but suddenly reversed course, dropping by more than $2 per barrel, shortly before the latest inventory update from the US Energy Information Administration. The report showed an unexpectedly large build in inventories, suggesting a sharp slowdown in demand last week. But it didn’t take long for prices to stabilise and rally once again, to end the session firmly in the green. Despite a brief dip overnight in response to weak Chinese data, crude was firmer again this morning as traders positioned themselves ahead of the key announcement from OPEC+ due later today. The ministers’ meeting was originally scheduled for last Sunday but was delayed apparently to a lack of agreement over who should be cutting production and by how much. The expectation was that the group would announce additional cuts to output in a bid to support prices. Some were speculating ahead of the announcement that this could be an additional 1 million barrels per day, on top of the existing 1 million barrel cut from Saudi Arabia. This seems to be broadly in line with what happened. But as is often the case, it’s better to travel than to arrive. Crude fell sharply following the announcement. We’ll see if buyers step in as they did yesterday to take advantage of the dip in prices.
As can be seen from the 4-hour chart above, the positive divergence of the MACD with price did have a bullish resolution. Now we’ll see where support comes in.
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