WTI settles below $49 on OPEC disappointment
On Thursday, OPEC and non-members led by Russia agreed to extend cuts in oil output by nine more months to March 2018 to fight the supply glut, which has been pressuring crude oil prices in the past couple of years. However, despite that solid step to balance the oil market, the initial market reaction pushed the prices even lower. The barrel of West Texas Intermediate dropped to its weekly low at $48.47 and settled at $48.62, losing 5.3% on the day.
Speaking to the press following the meeting, Saudi Energy Minister Khalid al -Falih said that they considered various scenarios, from six to nine to 12 months, and they even considered options for a higher cut but all indications discovered that a nine-month extension was optimum.
However, since the start of the week investors have been pricing the possibility of deeper cuts that would surpass the current 1.8 million barrels per day (bpd) level and sold the fact after OPEC decided to keep this level unchanged as no new countries were added to the deal.
Al-Falih also noted that Thursday's drop was "technical" and that prices would recover as global inventories shrink, including because of declining Saudi exports to the United States.
Technical levels to watch
The immediate support for the barrel of WTI aligns at $48.05 (May 18 low) followed by $47.35 (May 11 low) and $47 (psychological level). On the flip side, resistances could be seen at $49.40 (May 16 high), $50 (psychological level) and $50.55 (May 19 high).
OPEC headlines on Thursday
- OPEC Conference President: Aramco will invest $20 bln extra in U.S. Market in 5 years through Motiva platform
- Fitch: OPEC deal to cut oil inventories, but shale key long-term
- OPEC Conference President: long-term trend will be healthy
- OPEC Conference President: exports will drop as summer domestic use rises
- OPEC Conference President: we can extend oil output deal in November
- Russia Energy Minister: cooperation with OPEC will continue and widen
- Nigeria Oil Minister: I'm not worried about oil price decline, it will go back up
- OPEC Conference President: all indications are that nine-month extension is optimal
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
