OPEC+ has taken a tough stance, slashing output by 2 million barrels per day (bpd) beginning in November 2022, the largest reduction in crude oil production since March 2020.
In addition to production extending the agreement through 2023, oil producers have agreed to hold semiannual rather than monthly meetings.
WTI oil briefly spiked to 887/BBL following the OPEC+ announcement. It then broke through that level in response to disappointing US crude oil inventory data (-1.36 million barrels vs. 2.05 expected) and a strong US ISM Services PMI, which delayed recessionary warning signs following the weak ISM Manufacturing PMI earlier this week.
The move by OPEC+ risks putting renewed pressure on crude oil’s global supply-demand balance in the coming months, potentially resulting in a price floor at pre-OPEC+ meeting levels.
On a technical level, WTI crude and (also Brent) prices are currently testing a key resistance area, defined by the 50-day moving average and the 23.6% Fibonacci retracement level of the range between September lows and June highs.
A sharp break above this resistance zone and then the 990/BBL level (September highs) could put additional upward pressure on an extension towards the 50% of the Fibonacci level (998.6/BBL) and then 100/bbl.
Idea written by Piero Cingari, forex and commodity analyst at Capital.com
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