Oil gains over 2% in spite of a relatively disappointing OPEC decision
Both grades of oil - Brent and WTI - are trading over 2% higher today after OPEC+ made a decision on the supply limits for 2021. Oil producers agreed to boost oil output by 500k barrels per day starting from January. Decisions on what to do next will be made each month. Revision of the strategy is likely to be made by the end of the first quarter of 2021. Markets expected that OPEC+ decided to extend output cuts at 7.7million barrels per day. An agreement struck in April assumed that output cuts will be lowered to 5.7 million barrels per day.
One may wonder why oil is trading higher today. Firstly, commodities are being boosted by the weak dollar. Secondly, final days of OPEC talks were marked with high uncertainty. Having said that, a decision that in some way limits the return of a huge supply to the market can be seen as a positive for market bulls. However, it will be important which country is allowed to boost production as a lot of OPEC members were cheating on the previous production quotas.
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Oil gains today. While OPEC decision on oil output can be seen as mixed, it has brought an end to market uncertainty. Apart from that, weak USD is also supporting commodity prices. However, long-term seasonal patterns hint that oil should trade lower in near future. Source: xStation5
