CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

OPEC+ are expected to increase crude oil production, but when and by how much?

In this article we preview the upcoming OPEC+ meeting and look at how crude oil prices could react to the news.

When is the OPEC+ meeting

The Organization of Petroleum Exporting Countries and Allies (OPEC+) is scheduled to meet on the 1 July 2021 to discuss the future of oil production amongst its members. OPEC+ has been guiding a gradual easing of supply curbs in place in lieu of an improving global economic recovery and in turn increasing demand side assumptions.

The meetings which will run throughout the day are expected to produce outcomes into the evening (GMT).

What to expect from the OPEC+ meeting

OPEC+ has previously forecast an increase in demand of around 5.89 million barrels per day in the second half of 2021. The group has already committed to increasing supply ‘gradually’ by a little more than 2 million barrels per day from May through to July.

Markets are expecting a further tapering of supply curbs to be announced for the start of August. Consensus estimates suggest that these curbs could amount to another 500,000 barrels per day of production.

How will oil prices react to the OPEC+ news?

Should the further easing of supply curbs at the start of August be realised around consensus (500,000 barrels per day), oil prices are expected to have a muted response to the news. Should an earlier than expected tapering of output curbs be announced (i.e. starting in July 2021 rather than August 2021) and/or a higher than expected production increase manifest, oil prices are likely to come under pressure in the near term. A slower than expected output increase or delay to an increase in production would on the other hand be bullish for oil markets.

Brent crude oil – technical analysis

Brent crude has now started to pullback from overbought territory after making new short-term highs. The pullback is currently finding support at the lower level of our channel (dotted red lines).

The longer-term trend remains up. In lieu of this, we are not looking to short the current move lower. We are however also not looking to go long, up until outcomes from the all-important OPEC+ meetings are signalled to the market.

Higher and sooner than expected production increases are likely to see renewed decline and brent crude prices moving back towards the 7110 mark.

Lower and later than expected production increases could see short term gains renewed with the recent high and channel resistance being tested.

Summary

  • OPEC+ will meet on the 1 July 2021 to decide the fate of future crude oil production
  • Markets are expecting supply curbs to be eased further from the beginning of August 2021
  • Supply increases of crude oil are expected to be realised at an extra 500,000 barrels per day
  • Oil prices are expected to trade relatively muted should an output increase be realised at or around consensus
  • Higher and earlier than expected production increase could be negative for oil prices in the short term
  • Lower and later than expected production increases could be positive for oil prices in the short term
  • The long-term trend for oil remains up, although we are currently seeing a short term correction from overbought territory

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?

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