Oil Pushes Higher After Historic OPEC+ Deal
Oil pushed higher after swinging wildly in early trading as investors weighed whether an historic deal by the world’s biggest producers to cut output would be enough to steady a market pummeled by the coronavirus.
Futures in London rose around 5% to near $33 a barrel after the OPEC+ alliance agreed to a plan to slash production by 9.7 million barrels a day starting in May, ending a price war between Saudi Arabia and Russia. The group reached a deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday.
The U.S., Brazil and Canada will contribute another 3.7 million barrels on paper as their production declines, and other Group of 20 nations will cut an additional 1.3 million. The G-20 numbers don’t represent real voluntary cuts, but rather reflect the impact that low prices have already had on output and would take months, or perhaps more than a year, to occur.
Oil prices have been in freefall since the middle of February as some of the world’s biggest economies went into lockdown to try and stop the spread of the coronavirus. Whether the OPEC+ deal will be enough to steady a market where demand losses may be as much as 35 million barrels a day and storage space is rapidly running out remains to be seen. Goldman Sachs Group Inc. called the agreement “historic yet insufficient”.
“The deal is a little less than the market expected given that Mexico has gotten off easy,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The hard work lies ahead given that the market is very skeptical that OPEC+ are actually going to be able to come up with their near 10 million barrels a day of production cuts.”
Brent for June delivery rose 4.6% to $32.94 a barrel on the ICE Futures Europe exchange as of 10:09 a.m. in Singapore. It lost 7.7% last week and has fallen from $66 at the end of last year. The global benchmark’s June-December timespread moved slightly deeper into contango, indicating that traders see the physical glut worsening even with the output cuts.
West Texas Intermediate for May delivery added 5.4% to $23.98 a barrel on the New York Mercantile Exchange after dropping almost 20% last week.
The voluntary reductions by OPEC+ would only lead to an actual 4.3 million barrel a day cut in production from first-quarter levels, assuming full compliance by core-OPEC and 50% by other participants in May, Goldman said in a note. The bank sees demand losses in April and May averaging 19 million barrels a day.
Support us to keep publishing free analysis and trade setups
Subscribe to our premium packages if you would like to get 1000+ instruments analysis and trade signals of Chartreadreadepro.
You can contact us via Skype User Name: Chartreaderpro
DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility