OPEC extended the production cut so why we are see the price tumbling? As Alpari Research and Analysis we say that for quite a long time. Cuts won't help much and cannot strongly influence the price of the OIL. In addition to that, we are just witnessing typical market mechanics, which we will describe further on.
Extension of the cut in the oil output was expected for a long time. Traders used that reason to but Oil and because of that, the price climbed sharply in the first half of May. When the rumour becomes a truth, you sell - that what usually happens. That is why traders often repeat: buy the rumours and sell the facts. Current situation on the Oil is just another example of this old school quote.
Second thing is the cut itself. We said that before and we will repeat that again. If some countries cut the output, other will increase it in order to close the gap and gain market shares. Shale producers, non-OPEC countries, they all are happy with the cuts as it helps their business and the overall supply-demand situation stays the same.
Last but not least we have a bearish technical situation here. Price did not manage to break the resistance on the 52 USD/oz (WTI) and broke the lower line of the flag (blue lines), which is a strong negative signal. Bearish reaction followed, driven by the convergence of the fundamental and technical factors. The beginning of the new week just proves my point, we are going down. Buyers do not even have enough strength to test the lower line of the flag as a closest resistance.
So what are the perspectives? Not very bright. When we look at the indexes we can see that we are in times of the prosperity and yet the demand for the Oil is low. I do not see a reason why this demand should increase in next few years especially when we should see a global recession/correction at some point this or the next year.
Trading FX/CFDs on margin bears a high level of risk, and may not be suitable for all investors. Before deciding to trade FX/CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. You can sustain significant loss.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.