OPEC+ and Friends finally agree on an oil deal
Oil prices fail to recover significantly thus far, as fall in demand exceeds that of expected output cuts.
Oil WTI Technical analysis, overview, strategies, and levels
Oil prices were in for a rude awakening late last week, partially recovering this morning on a deal between the oil majors at last that could involve an output cut reduction of up to 20% of global output during the oil price war, though still failing to balance out against a bigger reduction in demand thanks to the coronavirus.
It’s a record cut, four times the size of that the previous record reduction out of OPEC in 2008 and could involve as many as 23 countries. OPEC+ is expected to reduce output by 9.7m bpd (barrels per day), though when considering the rise in output in April due to the oil price war, that effectively increases that figure to over 12m bpd (and highlighting how much more oil could return to the market should another oil price war erupt). Unconfirmed reports say that for non-OPEC+ countries (including the US, Canada, Norway, Indonesia and Brazil) the contribution would be 4-5m bpd to the output cut, and IEA may announce purchases of up to 3m bpd over the next couple of months to take additional supply off the market.
The figure should drop to 8m bpd thereafter until the end of this year, and 6m bpd until April of 2022, highlighting the extent to which the deal is expected to remain in place, and the difficulty from a compliance standpoint in keeping this many countries from violating the agreement just as government deficits get severely tested.
In oil data, last week’s Baker Hughes US oil rig count showed another successive big drop, to 504 from 562 prior as more higher cost rigs get idled due to what has been persistent lower oil prices. With an oil deal now agreed upon, the question mark will remain the effects of the coronavirus on the economy and the ongoing increase in cases that might extend lockdowns, and in turn dent demand for the energy commodity.
IG client* and CoT sentiment for Oil WTI
As for trader bias, retail sentiment is in extreme long territory as fresh shorts were enticed into closing out on the price drop, while CoT traders have increased their long bias back into extreme long territory at 79%.
Oil WTI chart with retail and institutional sentiment
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am.
Be sure to request IG’s Weekly & Daily Market Report when you open an account with IG Dubai and get access to the full information on the FX majors, commodities, indices, and Bitcoin.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Be ready to respond to the upcoming OPEC meeting
Your guide to how OPEC influences oil prices ahead of its next meeting on 1 April 2021.
- What was decided at the last OPEC meeting?
- Why do OPEC members agree to oil quotas?
- Which countries are members of OPEC?
Live prices on most popular markets