The OPEC ministers agreed on the 500k cut proposal

The countries that make up the OPEC oil-producing cartel have been talking into the night where deep cuts to production have been proposed, a solution to support the price of fuel around the world. As it stands, OPEC nations have agreed to cut production by 1.2 million barrels per day through March but the group was discussing a further cut of 500,000 barrels a day "in order to safely go through the seasonal demand trough in the first quarter 2020," Russian Energy Minister Alexander Novak, had said earlier in the day. 

There are news wires are now reporting that OPEC and non-OPEC members have reduced the total to 5,000 barrels more than the previous agreement. It is an agreement in principle and details and final distribution will need to be discussed later today. 

Market implications

Markets were hoping for a news conference but an OPEC spokesman recently told waiting journalists that it would not take place and that a written statement might come later. For the meanwhile, the price of WTI is steady at around $58.30, awaiting further confirmations. However, the question is whether this is enough of a cut, considering that we have more oil coming to market from non-OPEC nations, such as from North America, Brazil, Norway and Guyana.

At face value, the news that OPEC had agreed to an additional 500k of cuts was arguably a much better outcome for markets than was expected. However, in reality, the fact that the cuts have yet to be ratified by OPEC+, the allocation of quotas yet to be decided and that cuts rely on 100% current compliance," analysts at Westpac explained.

WTI could drop should the sentiment be that this is not enough and $55 is a line in the sand on the downside. Technically, the price is due a downside correction if the rising channel's rules are applied with the price testing channel resistance while above the 200-day moving average. A break to the upside will look to a prior high of $61 the figure and trendline resistance ahead of $63.50.