Despite the OPEC+ production cuts, demand destruction is still oil’s key driver
UKOil (left) and USOil (right) remain in primary downtrends, with a price pattern of lower peaks followed by lower troughs. This tendency is despite OPEC+'s announcement last week to cut production by 2m barrels per day from November.
The reduction, aimed at supporting energy prices, is the most significant cut since the start of the pandemic. Oil prices initially reacted, with UKOil climbing 15% last week and WTI appreciating by almost 17%. However, even after such mammoth gains, price action remains defined by the lower peak/lower trough dynamic. To break this, UKOil needs to break above $105.45 and USOil above $97.64 (green horizontal lines).
However, price momentum is biased downwards (green rectangles), and demand is declining. To this end, the IMF has lowered its forecast for global growth in 2023. Moreover, it warned that systemic financial risk is increasing.
The pace of central bank interest rate hikes and Covid restrictions in Shanghai and Shenzhen are taking massive tolls. These policies will likely cap crude prices, limiting any production cuts' support.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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