Oil prices have slumped over 4% since OPEC+ announced that it has reached an agreement on additional oil output cuts at a meeting today. While output cuts should be positive for prices, the announced size of the extra output cut (1 million bpd) was expected by the markets and hinted by media reports. However, details of the agreement turned out to be a massive disappointment. Namely, it seems that OPEC+ did not agree on output levels for individual countries and that member countries will announce size of output cuts themselves. On top of that, it was said that all the extra cuts will be voluntarily. This actually means that OPEC+ has failed to agree on anything definitive. Voluntary cuts can be reversed at any moment, do not require OPEC+ consent to be dropped, and the fact that they are voluntary means that they do not have to amount to 1 million barrels per day. It looks like today's announcement may have been made with a sole purpose of not giving more fuel to speculations on disagreements among OPEC+ member countries.
Taking a look at Brent chart (OIL) at H1 interval, we can see that prices went into freefall following OPEC+ announcement today, erased all of daily gains and are now attempting to break below the 200-hour moving average (purple line).
Start investing today or test a free demoOpen real account TRY DEMO Download mobile app Download mobile app
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.