OPEC+ meetings result in price breakout for oil
OPEC+ meeting concludes to delay an increase in production until February 2021, while oil prices enjoy the best level since the March lows.
After a delayed meeting about future oil production between the Organization of Petroleum Exporting Countries (OPEC) and other major producers (OPEC+) of the commodity, prices have started to rise.
The suggestion from OPEC+ is that delays to increasing output could be extended into January 2021. Thereafter we could see a gradual increase in production of around 500 000 barrels per day starting in February 2021.
Current supply curbs to oil production by OPEC+ are close to 8million barrels per day. The supply curbs in place have come as producers have looked to bolster pricing levels, whilst reducing the supply glut, amidst waning demand accelerated by the current pandemic.
Oil prices currently trade at around their best levels since early March this year. A sharp rebound in the commodity has followed perceived outcomes of the US general election as well as progress relating to a COVID-19 vaccine. This data has supported the notion of an improving economic outlook leading to a future rebound in demand for commodities such as oil.
Brent Oil
The below daily price chart of Brent Crude, shows that IG clients are currently net buyers of oil, as 59% of traders with open positions currently expect the commodity to rise in the near term.
From a technical analysis perspective, the price of Brent has recently broken out of a bullish flag formation. The pattern is highlighted with the parallel black lines on the chart above. The upside breakout is preemptive of further gains with 49.00 the initial upside target. A break of this level, confirmed with a close above, would suggest that the next upside target is located at a historical resistance level of 53.00. Should the commodity’s price instead move to close below the short term low at 46.80, the bullish indications would be deemed to have failed.
In Summary
- OPEC+ is expected to delay an increase in production until February 2021
- In February, current supply curbs amounting to roughly 8 million barrels per day could be adjusted by 500 000 barrels per day
- Oil prices are trading at their best levels since March this year
- The rebound in oil prices since the November lows have been catalyzed by election outcomes and progress with regards to a COVID-19 vaccine
- 59% of IG clients with open positions expect the price of oil to rise in the near term
- There is a technical breakout on the price of Brent crude with $49/barrel the initial target
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