OPEC production cut fails to spark crude revival

Despite immediate gains, the 1.2 million barrels per day production cut agreed by OPEC+ has failed to really gain traction. Following a surprise sharp drawdown in US inventories, markets await a signal on whether we will see a bullish reversal start to take shape.

Source: Bloomberg

Crude oil has been in the spotlight of late, with expectations of a production cut from OPEC+ (which is the Organisation of the Petroleum Exporting Countries [OPEC] plus the inclusion of non-members such as Russia, Mexico and Kazakhstan, among others) bringing the possibility of a bottom for a market that has spent much of the past two months in decline. However, while we did see a production cut, the outcome has been somewhat muted, raising questions over whether this will really be enough to reverse the fortunes of crude.

While we have been seeing big declines of late, last week saw volatility in both directions. This came despite an unexpected drawdown in crude inventories. Recent predictions for 2019 from both the Energy Information Administration (EIA) and OPEC have alluded to a potential oversupply in crude, raising expectations of a drastic rise in inventories. The EIA chart below highlights as much, with the first half (H1) of 2019 expected to see crude stocks increase as supply outstrips demand.

EIA outlook chart

However, last week’s sharp decline in the US inventories figure was certainly a big shock to the markets, providing the one major outlier to that oversupply story. The chart below highlights this break from the growing trend of growing stockpiles, with the drawdown of -7.3 million barrels representing the biggest drop since July.

Weekly inventories chart

The big question here is whether this is a mere blip within a wider trend of oversupply, or else the beginning of an easing in that story. If we do see further contractions to US stockpiles, there is a strong chance that we will see crude start to gain ground.

OPEC

The big story of the week was always likely to come from OPEC, with the group once again joined by Russia in their desire to control oil prices. The eventual decision to cut production by 1.2 million barrels per day (bpd) for the first six months of 2019 provided crude prices with a welcome boost. That cut was split into an 800,000 bpd cut from OPEC, while non-OPEC members pledged to reduce their output by 400,000 bpd.

However, while we saw an initial boost to crude prices, it has clearly not done enough to spark calls for a bottom quite yet.

Looking at the Brent chart, we can see that the past week has seen the market break out of its steep decline, instead moving into a consolidation phase. Momentum appears to be on the rise, with the stochastic rising above 20 for the first time since mid-October.

Daily Brent chart

Meanwhile, the four-hour chart provides a clear indication of the consolidation that remains in place throughout the past fortnight. A break through the $63.60 mark, coupled with a rally above trendline resistance, would provide us with greater confidence that we will be able to see Brent regain a more bullish standing in the wake of the production cut last week.

Four-hour Brent chart

Until then, consolidation remains, with markets yet to truly show its hand on whether the 1.2 million bpd is going to be enough to shift us into a more bullish phase. The inventories story is another potential source of bullishness if we see that outlier followed up with another significant drawdown this week.

OPEC meeting

Your essential guide to Organisation of the Petroleum Exporting Countries (OPEC)
meetings – find out how they affect global oil prices and other energy markets.

Learn more

Denne informasjonen har blitt forberedt av IG Europe GmbH og IG Markets Ltd (begge IG). I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Denne informasjonen er ikke utarbeidet i samsvar med regelverket for investeringsanalyser, så derfor er denne informasjonen ansett å være markedsføringsmateriale. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder. Se fullstendig disclaimer og kvartalsvis oppsummering.

Finn artikler av analytikere

  • Aaran Fronda
    London
  • Alastair McCaig
    London
  • Angela Teng
    Singapore
  • Anzél Killian
    Johannesburg
  • Becca Cattlin
    London
  • Callum Cliffe
    London
  • Chris Beauchamp
    London
  • Chris Weston
    Melbourne
  • Daniel Dubrovsky
    San Francisco
  • James Stanley
    New York City
  • Jeremy Naylor
    London
  • Jingyi Pan
    Singapore
  • Joshua Mahony
    London
  • Joshua Warner
    London
  • Justin McQueen
    London
  • Kyle Rodda
    Australia
  • Markedsrapporten
    Norway
  • Martin Essex
    London
  • Michael Boutros
    New York City
  • Monte Safieddine
    Dubai
  • Nick Cawley
    London
  • Nyandabeh Ella Vincent
    Chicago
  • Paul Robinson
    New York
  • Rich Dvorak
    Chicago
  • Shane Walton
    Australia
  • Shaun Murison
    Johannesburg
  • Travis Robson
    Johannesburg
  • Victoria Scholar
    London
  • Will Hall-Smith
    London
window.$CQ = window.jQuery; window.IG = window.IG || {}; window.IG.cq = window.IG.cq || {};

CFDer er komplekse instrumenter som innebærer stor risiko for raske tap på grunn av giring. 75 % av alle ikke-profesjonelle kunder taper penger på CFDer hos denne leverandøren. Du burde tenke etter om du forstår hvordan CFDer fungerer og om du har råd til den høye risikoen for å tape penger. Profesjonelle kunder kan tape mer enn sitt opprinnelige innskudd. Opsjoner og turbowarranter er komplekse finansielle instrument og du risikerer kapitalen din. CFDer er komplekse instrumenter som innebærer stor risiko for raske tap på grunn av giring.

{"@context":"http://schema.org","@type":"NewsArticle","mainEntityOfPage":"https://www.ig.com/no/nyheter-og-trading-ideer/ravarer-nyheter/opec-production-cut-fails-to-spark-crude-revival-181210","headline":"OPEC production cut fails to spark crude revival","image":{"@type":"ImageObject","url":"https://a.c-dn.net/c/content/igcom/no_NO/ig-financial-markets/market-news-and-analysis/commodities/2018/12/10/opec-production-cut-fails-to-spark-crude-revival/jcr:content/textimage/image.img.jpg/1544452743924.jpg","height":230,"width":320},"publisher":{"@type":"Organization","name":"IG","logo":{"@type":"ImageObject","url":"https://a.c-dn.net/c/etc/designs/onedomain/images/IG-60x60.png","height":60,"width":60}},"datePublished":"2018-12-10T14:04:49+0000","dateModified":"2018-12-10T14:04:49+0000","author":{"@type":"Person","name":"Joshua Mahony"},"description":"Despite immediate gains, the 1.2 million barrels per day production cut agreed by OPEC+ has failed to really gain traction. Following a surprise sharp drawdown in US inventories, markets await a signal on whether we will see a bullish reversal start to take shape.","isAccessibleForFree":"True"} if(document.cookie.indexOf('userGdprLevel={"userLevel":"1"')>0){window["optimizely"]=window["optimizely"]||[];window.optimizely.push(["skipPageTracking"]);window["optimizely"].push(["optOutThirdPartyCookies"])}