USOIL Cautious Ahead of OPEC+ Meeting

  • USOil
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USOIL Analysis

OPEC, Russia and other allies known as OPEC+, have implemented additional voluntary cuts of around 2.2 million barrels per day (mbpd) this year, which are due to expire at the end the second quarter. The group is anticipated to decide the future of these reductions during its meeting on Sunday June 2, with baseline expectations being for a rollover. These events tend to have a level of uncertainty, which is aggravated this time by increased tension over offer capacity and compliance, creating scope for market volatility.

The aforementioned curbs are on top of another 3.66 mbd reduction scheme in place until the end of the year and the two combined, account for roughly 6% of global production. OPEC+ has implemented those curbs to supported oil prices but they may not be comfortable with much higher prices. This could risk demand destruction, with the International Energy Agency (IEA) already projecting a significant slowdown in 2024 consumption growth. [1]

After a strong first quarter, USOil runs its second losing month, amidst the Fed's reluctance to cut rates, spare capacity and the lack of substantial disruptions from the Middle East hostilities. Below the EMA200 bias is on the downside and USOIL vulnerable to 71.38, but sustained weakness does not look easy under current conditions.

On the other hand, OPEC+ production cuts are helpful for USOil, geopolitical tensions sustain risk for traffic restrictions and there are prospects for fairly balanced markets in the second half. As such, oil prices can rebound above the EMA200 (at around 80.00), but tackling the 2024 highs (87.66) has a higher degree of difficulty.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 19 Jul 2024 https://www.iea.org/reports/oil-market-report-may-2024

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