USOIL Upbeat After Monday’s Rally Fueled by the OPEC+ Cuts
USOIL Analysis
In a surprise move on Sunday, a series of oil producing countries announced production cuts on Sunday, to begin in May and last until the end of the year. These latest reductions amount to more than 1 million barrels/say combined. [1]
Russia had already slashed its output by 500,000, while OPEC and participating countries (OPEC+) had already agreed on a production cut plan of 2 million barrels/day back in October. All of that, add up to a planned reduction in output in excess of 3.6 million barrels/day.
Reacting to the announcement, the International Energy Agency (IEA) noted that oil markets were already "set to tighten" in the back half of the year and the OPEC+ decision risks "exacerbating those strains and pushing up oil prices". [2]
USOil comes from a two-week rebound from its mid-March slump. Sunday's move by OPEC+, send it to a 6% rally yesterday, extending the advance. Prospects of tighter supply due to the cuts and China's reopening are a tailwind.
The commodity is now close to new year highs (82.64), which will put 90.36 in its crosshairs, but it may prove elusive in the near term. On the other hand, the Relative Strength Index (RSI) is at the most overbought levels since October and a slide back to the EMA200 (mid-74.00s) would be reasonable base on that. Daily closes below it would shift immediate bias to the downside, but we sustained weakness much lower does not look easy under the new 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. 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
| Retrieved 04 Apr 2023 https://www.opec.org/opec_web/en/press_room/7120.htm | |
| Retrieved 28 Sep 2023 https://www.iea.org/news/statement-on-oil-markets |
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