OPEC+ meeting brings potential volatility for crude oil prices

While crude oil prices have been gaining ground of late, the upcoming OPEC+ meeting could bring major volatility to this consistent market.

What and when?

Energy markets look set to kick into gear, with Organisation of the Petroleum Exporting Countries (OPEC) scheduling their final 2019 meeting for this upcoming week. Preliminary talks are undertaken by the Joint Technical Committee (JTC) on Tuesday, with the full complement of OPEC ministers engaging in discussions by Thursday. Finally, the week will be wrapped up on Friday when non-OPEC nations join the talks to bring a final decision on output for the forthcoming months.

This meeting seeks to build on the actions taken back in July, when the OPEC+ group decided to restrict production for a further nine months in a bid to shore up oil prices. With brent standing 4% lower than the levels seen around the announcement, it evident that their action didn’t have the desired effect. However, to some extent it did, with prices likely to have declined significantly more should OPEC have increased output.

Supply and demand expectations dampen market sentiment

Expectations for future demand and supply dynamics do not bode well for crude bulls, with OPEC lowering their forecast for ongoing demand growth earlier this month. On the supply side, the IEA predict non-OPEC nations to add another 2.3 million barrels per day (bpd) to output. This highlights the issue for OPEC members, with their actions to elevate prices largely undone by the likes of the US who continue to raise output and grab market share.

The question for traders is what markets are expecting and where the big market moves could come. Firstly, markets do expect the current production quotas to be extended before long, yet it's not known whether this decision will come at this meeting or in the new year. Should the group decide to hold off, markets will be watching closely for a signal of what to expend in 2020. Should they decide to extend the current production levels, the length of such an extension will also be notable. Should the extension occur at this meeting, many have predicted a three-month shift in the end date to June 2020. Should the decision come later, that deadline could be shifted back.

What to look out for

There are three scenarios which could see sharp market movements for crude. A decision to drop the current production restriction would be the most obvious, with a ramp-up in production bringing a sharp decline in energy prices. Next, we have the question of just where those production levels should be set, with a decision to raise or lower output likely to bring significant market gyrations. Finally, there is the question over whether partners such as Russia will remain collaborators, with a potential break off from the additional nations likely to drive crude lower.

Overall, this meeting is likely to see the group either hold off or provide an extension which maintains the current status quo. Of course, either of those scenarios will have a limited impact on prices. However, examples given above are largely detrimental to crude levels, with the only positive impact coming from a decision to decrease output further.

The technical view

From a charting perspective, the weekly time frame signals the recent ascent from trendline support, with both price action and momentum gradually gaining ground over the past two months. This comes as we regain ground lost in the weeks following the attack on Saudi Arabian oil facilities. The question is whether this is part of a long-winded recovery to continue the uptrend highlighted by this ascending trendline or simply a pause before we continue the downtrend evident since the October 2018 peak.

On the daily time frame, we can see the recent ascent slowing as price drops out of its ascending channel formation. With the price failing to break significantly into a new high over the course of November, there is clearly an element of consolidation or hesitancy on the bullish side of this story.

Finally, watch the four-hour chart for clarity over whether we are due another decline or simply a continuation of this recent uptrend. A break below the most recent swing low of $62.03 would provide us with a bearish signal as we head into this latest meeting. Until that happens, the uptrend remains in play.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Trade on commodities

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1

  • 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

1In the case of all DFBs, there is a fixed expiry at some point in the future.

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.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.