Oil Prices Slump despite OPEC+ Extending Supply Cuts
USOil Analysis
OPEC and allies like Russia decided on Sunday to prolong their output cuts, a phased plan that started in late-2022 and has help put a floor under oil prices. The group known as OPEC+ extended a subset of cuts of around 3.66 mbpd into the next year. It also rolled over into Q3 this year's voluntary curbs of 2.2 mbpd that were set to expire at the end of the month.
This last tranche of reductions however, will be gradually phased out from October onwards and markets dis not like thta, amidst strong non-OPEC production and expected deceleration in consumption. As a result, USOil slumps around 5% this week, running a negative quarter and is now in risk of further losses that would threaten 67.69. It was also weighed by poor China and US factory activity, buildup in US stockpiles and renewed hopes for Middle East ceasefire.
On the other hand, the OPEC+ output cuts are forceful and could lead to tighter markets over the next few months. Monetary policy could also be supportive as major central banks are likely to adopt less restrictive stance, despite some reluctance. Furthermore, as long as the Middle East hostilities continue, there is always risk of traffic disruptions.
On the technical side, the Relative Strength Index (RSI) is in oversold territory and USOil tries to stabilize today, which can lead to recovery effort. Bulls would need to retake the EMA200 and the broader 78.90-80.60 region to return at the driver's seat, but that does not look easy under current conditions
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. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.