Oil Slips From Highs Ahead Of OPEC Meeting

Oil traders are gearing up for one of the most closely watched OPEC+ meetings in recent history.

Energy 3

Oil traders are gearing up for one of the most closely watched OPEC+ meetings in recent history.

Oil has risen over 10% across the past two sessions as investors grow increasingly optimistic that the OPEC+ group can agree to cut between 10 million – 15 million barrels per day. 

Reports on Thursday that Russia is prepared to cut 1.6 million barrels per day boosted optimism, sending WTI 5% higher to $27.46. However, reports that Saudi Arabia would want to cut from their April baseline, which is higher, making cuts more trivial, pulled oil off its high.

The OPEC+ meeting, via video conferencing today, is expected to be more successful than the group’s previous attempt in March. Last month’s the group’s failure to agree to extend supply cuts triggered a price war between Saudi Arabia and Russia.

$35 here we come?
There are still differences over plans to cut global output that Russia and Saudi Arabia need to resolve. However, we, like most traders expect a deal to be reached. This should set oil off on a short-term bullish move. The size of the rally will depend largely on whether the cuts are closer to 10 million barrels per day or 15 million.

Any rally will be capped below $35 because fundamentals remain weak. The bottom line is that the is too much oil whist demand has been crushed by the coronavirus outbreak. Demand outlook will start to ramp up but only once the lock down measures are eased. Signs of China starting to fire up again will offer support here.

Failure to agree
Should the OPEC+ group, or more specifically Russia and Saudi Arabia fail to iron out their differences, oil could rapidly give back the 10% gains achieved over the past 36 hours taking the price back towards support at $19.25

Levels to watch
WTI is trading 4% higher at $26.10, it has fallen back from the session high of $27.46 to $25.00 before rebounding again. Oil is trading comfortably above its ascending trendline from March 30th low.
Immediate resistance can be seen at $27.46, prior to $29.10 (high 3rd April) and $30.00 psychological number.
On the downside, support can be seen at $24.25 (trendline) prior to $23.50 (low 7th April)

More from Oil

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account