Brent Oil Slides Despite OPEC+ Cuts
OPEC and allies including Russia, have been implementing a series of supply reductions since late-2022, which have helped support oil prices and on Sunday they agreed to prolong those curbs. Around 3.66 million barrels (mbpd) of cuts that were due to expire at the end of the year were rolled over into 2025. The most recent tranche of 2.2 mbpd that would expire at the end of the month was extended into Q3 and will be phased of gradually after that. The decision keeps current total reduction cuts at nearly 5.9 mbpd and almost 6% of global output.
On the other hand, members will start tapering some of those curbs over a 12-month period starting in the fourth quarter and the detailed plan could hinder their ability to keep output lower, if such need arises. Furthermore, the group sidestepped the contentious issue of capacity, while compliance has generally been loose in the past.
Brent oil slumps following the decision, as output will start to go up from October, just as non-OPEC countries like the US keep pumping oil. At the same time, demand growth is expected to decelerate sharply this year. Optimism for Middle East ceasefire, along with poor China PMIs, also contributed. UKOil is now exposed to this year’s lows (74.76), although breaching those of 2023 (70.09) is a much harder task.
However, the deep output cuts by OPEC+ will lead to tighter market at least in the near term and this can continue to support oil prices. Furthermore, central banks are moving towards less restrictive monetary policies, which can also help. On the technical side, the RSI points to extremely oversold conditions that can contain the fall and give UKOil the opportunity to rebound. A return above the EMA200 (blackline) that would pause the bearish bias would need strong catalyst though and the upside is unfriendly.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”), previously FXCM EU Ltd (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video 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 via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
On the other hand, members will start tapering some of those curbs over a 12-month period starting in the fourth quarter and the detailed plan could hinder their ability to keep output lower, if such need arises. Furthermore, the group sidestepped the contentious issue of capacity, while compliance has generally been loose in the past.
Brent oil slumps following the decision, as output will start to go up from October, just as non-OPEC countries like the US keep pumping oil. At the same time, demand growth is expected to decelerate sharply this year. Optimism for Middle East ceasefire, along with poor China PMIs, also contributed. UKOil is now exposed to this year’s lows (74.76), although breaching those of 2023 (70.09) is a much harder task.
However, the deep output cuts by OPEC+ will lead to tighter market at least in the near term and this can continue to support oil prices. Furthermore, central banks are moving towards less restrictive monetary policies, which can also help. On the technical side, the RSI points to extremely oversold conditions that can contain the fall and give UKOil the opportunity to rebound. A return above the EMA200 (blackline) that would pause the bearish bias would need strong catalyst though and the upside is unfriendly.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”), previously FXCM EU Ltd (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video 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 via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
Follow and Trade this analysis from your Charts. FXCM now Integrated with TradingView. Contact FXCM for more information.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.