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WTI oil: rise and shine?
WTI oil price recently broke the resistance of $45 and came to trade below $47. It definitely gives an optimistic impression. If things stay as they are, it will likely come to $50 and above. What stands behind this upbeat performance?
OPEC+ has been having a number of difficult talks between the member countries to set the oil supply plans for the mid-term future. The process was “tiring” and “excruciating” as the Saudi Energy Minister commented, but the deal was finally reached. Output cuts will not be extended next year – instead, they will be eased. 500,000 barrels will be added to the daily oil production of the cartel. After that, in a month’s time, a new meeting will be held to decide on the coming month’s production plan, and the same will be happening each month.
So in the short-term, we have an emotional reaction of the oil market that liked to hear that OPEC+ considers current demand good enough to allow cut easing. In the long-term, however, the way the recent meetings have been going reveals an increasing disparity and disagreements between the cartel member countries. Will it lead to a split? It may. Time will tell.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.