The announcement from the OPEC+ surprised the market by following through on their plan to increase production by 400kb/d in January, potentially leading to a modestly oversupplied oil market early next year, explained analyst Rabobank. They see the bullish reaction in prices to the bearish announcement, as a sign of a potential bottom.
“The oil market got more bearish news on Thursday when OPEC+ decided to follow through on their plan to increase production by 400kb/d in January, potentially leading to a modestly oversupplied oil market next year. Nonetheless, the oil market rallied following the bearish announcement which could be an important signal that oil prices are putting in a bottom.”
“Not much has changed in our views despite the sharp correction in prices and we still expect sideways and choppy markets through year-end as we said last week before the oil rally begins in earnest again early next year. While the OPEC+ supply decision was a surprise to us, it does signal that the group is expecting robust demand next year. That's not to say we expect oil prices to rally straight up from here, but perhaps the lows are in the rear view mirror.”
“As for market volatility, we expect it to remain elevated, as these bigger trading ranges become the new normal and with that, there is both more risk and more trading opportunities ahead.”
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