Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

OPEC+ output cut to keep Brent crude oil price above the $90 mark?

The outlook on crude oil remains bearish despite a minor output cut from OPEC+.

Source: Bloomberg

​​Brent crude oil remains under pressure despite output reduction

Brent crude oil - the benchmark used for Europe, Africa and the Middle East - remains in a technical downtrend despite OPEC+ cutting output by 100,000 barrels a day (bpd) from October, amounting to roughly 0.1% of global demand, to counter a potential supply boost from Iran and bolster oil prices which have rapidly dropped on fears of an economic slowdown.

These worries were exacerbated by the indefinite shutdown of the Nord Stream 1 pipeline on Friday due to an apparent oil leak in one of its turbines, according to Russian-owned Gazprom, but which European leaders see as a political weapon since the closure was announced only hours after the European Union (EU) agreed to caps on wholesale gas prices to tackle the widening energy crisis and curb inflation.

The European Commission’s energy agency set out two options for doing so. The first involves limiting the amount which can be paid for gas imported from Russia and the second would introduce a capping mechanism which would differ from member state to member state, depending on their energy mix.

A concerted plan to mitigate soaring European gas and electricity prices caused by Russia’s invasion of Ukraine, including ‘radical energy intervention tools’, will be discussed by EU energy ministers on Friday.

The Dutch Title Transfer Facility (TTF) natural gas futures, the European benchmark, surged by around 30% on Monday as a reaction to the shutdown of the pipeline before giving back most of its gains as European governments planned to discuss stepping up efforts to curb prices, including a suspension of power derivates trading, while recent data has shown that natural gas storage sites were being filled faster than expected ahead of the peak demand winter season.

Oil prices have also briefly risen by around 4% to $96.54 for Brent on Monday but have since been dragged down by recession fears and a potential supply boost from Iranian crude returning to the market if the country is able to revive its 2015 nuclear deal with West.

The current decline in the oil price is taking place despite Saudi Arabia, OPEC's de-facto leader, stating that the cartel was willing to take further steps to support the global oil market if necessary.

What does the technical outlook show?

Brent crude oil has been trading in a sideways range since the second week of July but in the medium-term remains in a downtrend from its approximate $123.50 June peak, currently trading lower by around 25% on global recession worries and despite OPEC+ trying to keep the Brent crude oil price above the $90 mark.

LCO daily chart Source: ProRealTime

Compared to this year’s March peak, the price of Brent crude oil has dropped by 30% and is likely to continue to slide as long as it remains below the $104.22 to $106.09 technical resistance zone which encapsulates the mid-May and June lows as well as the mid- to late July highs.

The late August spike in the oil price ran out of steam marginally below this key resistance area at $103.24 before dipping by over 10% within three days and retesting the $92.43 to $91.08 support zone which consists of the July and August lows.

A slip through the $91.08 August trough would push the 2020-to-2022 uptrend line at $87.65 to the fore, a slip through which would engage the October 2021 high at $85.85.

LCO weekly chart Source: ProRealTime

Immediate downside pressure should be maintained while the price of Brent crude oil remains below Monday’s high at $96.54 on a daily chart closing basis.

Above it meanders the 200-day simple moving average (SMA) at $99.03 which acts as a proxy as to whether a market is in an up- or downtrend, depending on whether an asset’s price trades above or below it.

In case of Brent crude oil, the fact that it now trades below the 200-day SMA implies that it is in a downtrend.

The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

React to volatility on commodity markets

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

See opportunity on a commodity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a commodity?

Don’t miss your chance. Upgrade to a live account to take advantage.

  • Analyse and deal seamlessly on fast, intuitive charts
  • Get spreads from just 0.3 points on Spot Gold
  • See and react to breaking news in-platform

See opportunity on a commodity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.