China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
OPEC+ meeting on June 6
2020-06-05 • Updated
Investors await the OPEC+ decision on output cuts. It will define where the oil price will go.
The oil market was completely destroyed this year. The coronavirus outbreak forced all the people to stop travelling, driving their cars and factories to shut down. As a result, the oil demand crashed. Moreover, Russia rejected the OPEC’s proposal to cut supply to stabilize oil prices amid the coronavirus crisis. That leaded to some kind of a competition between Russia and Saudi Arabia: “Who will pump more oil?”. The effect was devastating – oil prices fell below 0. Finally, OPEC+ members agreed on output cuts and oil prices bounced back.
What’s happening now?
Firstly, lockdowns eased and the oil demand recovered a little bit. Secondly, oil producers have made significant output cuts. Eventually, oil prices have rebounded, but they are still well below the pre-crisis levels. The main catalyst for the oil prices’ growth will be the OPEC+ meeting tomorrow. Most analysts highly expect its members to continue supply cuts. Also, it’s not only important how much oil barrels they will decide to cut, but also for how long they will extend their agreement.
There are some doubts about the alliance’s decision. Firstly, investors were afraid that Russia may refuse to extend cuts. However, Russia’s Energy Minister Alexander Novak reassured them as he claimed that Russia is open for next cuts. The problem now is the OPEC’s second largest producer, Iraq as it reached only 42% compliance. And, other members won’t be interested to cut supply unless Iraq abides the agreement.
Moreover, the US NFP data was better than analysts expected. It improved the market sentiment and oil prices surged in a wave of a global optimism. That also means, that economies are recovering after the coronavirus damage and the oil demand will soon come back to its previous levels.
Let’s look at the Brent oil chart. The price is headed toward the retracement level at $45 near the 50% Fibonacci level. If the Brent price crosses it, it will clear the way towards the key level at $51.5 where the 61.8% Fibonacci level meets the 200-day moving average. Support levels are 39 and 36.
Follow OPEC+ decision tomorrow and remember that to trade Brent with FBS you need to choose BRN-20N.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.