What does OPEC+ deal mean to crude prices?

What does OPEC+ deal mean to crude prices?

2020-04-13 • Updated

The world’s top oil producers pulled off a historic deal to cut global petroleum output by nearly a 10th, and they considered this deal as an end to the devastating price war that brought the energy industry to its knees. However, crude oil isn’t inspired by the news much as its price has been drifting lower since the beginning of the Asian session. 

Is the price war over? 

In short, no it’s not. Today, Saudi Aramco announced that it cuts all May oil pricing to Asia. In addition it raises May oil pricing to the US by $2.50-$4.20/BBL.

Why crude oil did not rally? 

  1. The deal has been already priced in since few weeks back, when there were multiple statements by some producers that a deal is needed. Back then, Brent already rallied to $36, while WTI Crude traded near $30.
  2. The decision is disappointing somehow. The market expected over 15 million barrel cut including OPEC+ and G20. OPEC couldn’t even cut production by the 10 million they had been talking about as Mexico opposed such decision. 
  3. Despite the deal and the timing of it amid the global crisis of coronavirus, the global economy is not in shape to handle high oil prices by any means, especially as the global recession is here to stay.

What does it mean for crude oil prices?

Reading the history is very important when it comes to crude oil trends. Everyone is asking the same question now: will the price of oil skyrocket again? In short, the answer is no.

The deal that was signed after Saudi Arabia called for an emergency meeting to discuss oil prices will lead to some stabilization and/or will at least stop the crash, but it won’t necessarily help crude oil skyrocket. 

This is exactly what happened back in 2015 and 2016 when the prices crashed and OPEC was forced to stop the crash by cutting the output after verbal statements failed to stop the crash. 

Brent crude outlook 

brent 1.png

From a technical point of view, Brent crude has been trading within a tight range after retracing 23.6% from the latest crash as shown on the chart and failed to continue with its retracement. Yet, the current declines might continue all the way back to 27.28 key support, which likely to hold over the next few weeks. 

WTI crude outlook

WTI.png

WTI has almost the same scenario, but WTI technical outlook is more bearish than Brent for now. WTI failed to retrace by 23.6% and declined before testing it all the way back to $23 earlier today. We believe that the key support for WTI stands at $21.50. A break below this support would lead to another leg lower once again back to 19.27.

Final note 

Traders needs to be careful over the next few days and weeks. There is no need to overestimate the next move whether it’s higher or lower. The deal that was announced is supposed to stabilize the market, it doesn’t mean that oil will skyrocket once again especially as the global economy is suffering amid the global lockdown due to the coronavirus pandemic. Therefore, if the prices stabilize, it will be a perfect opportunity to pick up some trades from the technical analysis point of view. 

   LOG IN

Similar

OPEC Boosts The Oil Market
OPEC Boosts The Oil Market

Brent crude futures is maintaining stability this Friday, with traders awaiting an OPEC+ meeting that might lead to further supply cuts. Brent crude was down 8 cents at $81.34 a barrel, following a 0.7% drop in the previous session.

How Will China’s Regulation Affect Oil?
How Will China’s Regulation Affect Oil?

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.

The Oil Market in the Month of June
The Oil Market in the Month of June

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.

Latest news

Is Bitcoin Set to Drop?
Is Bitcoin Set to Drop?

Bitcoin's price remains stagnant despite the Fed's slightly less hawkish tone. In contrast, Bitcoin has outperformed other assets, doubling in price from $16K to nearly $38K this year. Improved fundamentals, including the resolution of Binance concerns...

Top Three Trade Ideas for December 2023
Top Three Trade Ideas for December 2023

Hey folks, it’s a wrap to yet another month in the 2023 calendar, and I’m guessing you know what that means - time for another episode in the “What To Trade” series. For December, I will be mapping out trade more cautiously as the market volatility often drops

Gold Breaks To New Highs. What Is Expected In December?
Gold Breaks To New Highs. What Is Expected In December?

Gold prices, reaching the highest since May 5, are consolidating as traders await the US PCE Price Index, a key inflation indicator. The upcoming data could impact the Fed's policy, influencing the demand for the US Dollar and providing direction for gold. The Greenback sees some repositioning, recovering modestly ahead of the data risk.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera