Deep Output Cuts
The Organization of the Petroleum Exporting Countries (OPEC) and cooperating countries outside of it, most notably Russia, have been returning oil to the market since last year, phasing out the historic cut of around 10 million barrels/day they had imposed in 2020 an the wake of the Covid-19 pandemic.
This era of production increases is now over, since the group commonly referred to as OPEC+, agreed on Thursday to slash its output by a massive 2 million barrels/day, starting from November. It also decided adjust the frequency of its meeting to once every two months, from the monthly schedule up until now. 
More to it, the participating countries decided to extend their cooperation until the end of next year, highlighting their commitment to the program and to supporting oil prices.
Demand vs Supply
The decision by OPEC+ to reverse course and move with deep production cuts, comes as oil prices have been falling since the start of the summer. This occurred as supply fears in the aftermath of the war in Ukraine, gave way to worries over demand.
This is largely attributed to prospects of a global recession, amidst strong monetary tightening by major central, in order bring down inflation. The US Federal Reserve for instance, runs its most aggressive tightening cycle since at least the mid-1990s, having delivered 300 basis points of rate hikes since the March lift-off.
Furthermore, Western countries have imposed restrictions on Russian imports, including caps on the price of oil, which sets a dangerous precedent for OPEC. This was likely factored-in to yesterday's decision for strong action, which signals its commitment to support oil prices and assert its authority.
The deep production cuts shift focus back to the supply side in an already tight market, with the recent push-and-pull between the two opposing forces, likely to continue. However, the real amount of oil removed from the market, may end up being smaller, as the August levels will be used as the benchmark.
White House Reaction
President Biden has been making multifaceted efforts to bring down oil and gasoline prices that push inflation higher and give him a political headache, ahead of November's mid-term elections. He had visited the Middle East and Saudi Arabia –the de facto leader of OPEC – over the summer, but it does not look like the trip helped toward this goal.
After Thursday's OPEC+ announcement, US National Security Advisor and the Director of the National Economic Council issued a statement, expressing the disappointment of President Biden by the "shortsighted decision" . They also noted that the US will release anther 10 million barrels of oil form the Strategic Petroleum Reserve (SPR) and that the administration will consult with Congress for ways to "reduce OPEC's control over energy prices".
Not long after that, the White House Pres Secretary doubled down, saying that "…it's clear that OPEC+ is aligning with — with Russia with today's announcement".
Earlier in the day, the European Union had agreed on the eighth package of sanctions against Russia, which includes a price cap on Russian oil , with EU Commissioner Ms von der Leyen welcoming the decision. 
The commodity had skyrocketed to fourteen-year highs in March (129.45) due to the war in Ukraine, posting a six month-rally. Most of the year's gains however were erased, as a four month losing streak followed, with USOil plunging by around 30% from June to September.
After last month's low it managed to stage a recovery, helped by supply issued and expectations around OPEC+ decision, the announcement of which sent USOil to three weeks high yesterday, in an effort to resist the recent death-cross bearish formation (EMA50 < EMA200).
It now has the chance to push towards the critical 92.70-94.36 region. Surpassing it however, could prove harder, since it contains the 38.2% Fibonacci of the June high/September low slump, the EMA200 and the lower border of the Daily Ichimoku Cloud.
As long as the recovery stays below the 38.2% Fibonacci, USOil is in precarious position and there is scope for new 2022 lows.
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.
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