Oil makes another breakthrough
This time, it is reported that OPEC+ will discuss an increase in oil production by 500,000 barrels per day.
Already weak oil prices took another hit today as the Wall Street Journal reported that OPEC+ will discuss a 500,000 bpd increase in production at its December 4 meeting. Brent and WTI fell more than 5% each to new quarterly lows after breaking their respective lows in September.
My first reaction to this as yet unconfirmed title was, “Well, that’s kind of weird.” Not least because oil prices fell by about 10% last week. OPEC may counter that it fears a looming EU embargo on Russian oil could lead to a global supply shortage, so as a responsible advocate for the oil market, it is doing the right thing. But there may be more. For example, don’t you find it odd that the US government granted immunity to Saudi Crown Prince Mohammed bin Salman just a few days ago, protecting him from prosecution for the murder of US citizen and Saudi political dissident Jamal Khashoggi? If I scratch your back, will you scratch mine? “Absolutely” seems, at first glance, the answer of the government of Saudi Arabia.
In any case, if the WSJ report proves to be true, be prepared for more drops in oil prices in the coming weeks as the market is already worried about falling demand due to a less mobile Chinese economy amid fears of new Covid lockdowns.
At the beginning of the quarter, OPEC+ agreed to cut production by 2 million barrels per day, which would therefore mean another change in policy, whether or not there are political overtones.
Following the WSJ report and worries about Chinese demand, WTI just broke its previous low at $76.16, paving the way for a potential decline to $75. We previously expected WTI crude to break $80 after the collapse of the descending triangle consolidation pattern.
Source: TradingView, StoneX.
Text: Fawad Razaqzada, FOREX.com » Official site
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