OPEC Meeting : Is the Future of Crude Oil Hanging in the Balance at the Meeting’s Consensus?

It was truly a day of ups and downs in yesterday’s trading session due to the OPEC Meeting. The market was pulsating with volatility and the base of Commodity Samachar was flooding in with calls. It was truly an exciting day. 

Oil had fallen by more than 2% on Thursday after the OPEC+ producers had agreed to voluntarily cut oil outputs for the first quarter of next year that fell short of market expectations. 

So what was the consensus reached by the OPEC+ during its ministerial meeting? 

Let’s get started on that. 

OPEC Meeting – The Final Consensus: 

The Oil giants Saudi Arabia, Russia and other members of the OPEC + pumping more than 40% of the world’s oil, met online on Thursday to discuss the flow and supply policy for crude oil. 

On Thursday, OPEC+ agreed to voluntarily cut outputs totalling about 2.2 million barrels per day (BPD) for early next year led by Saudi Arabia rolling over its current voluntary cut. 

Moving forward, the group had discussed 2024 output amidst the expectation that the market faces a potential surplus and 1 million barrels per day (bpd) cut by Saudi Arabia was set to end next month. 

After the OPEC meeting, they stated that the total curbs amount to 2.2 million bpd from 8 producers. Within this figure is an extension of the Saudi and Russian voluntary cuts of 1.3 million bpd. The 900,000 bpd of annual cuts pledged on Thursday included 200,000 bpd of fuel export reductions from Russia with the rest divided amongst six members. 

OPEC Members Voice Their Statement: What are their perspectives? 

Coming towards individual elements and statements from the members, here’s what they had to say. 

The Russian Deputy Prime Minister Alexander Novak had said that Russia’s voluntary cut would include crude and adjoining products. 

The UAE stated that they had agreed to cut output by 163,000 bpd whereas Irag had said that it would cut an extra 220,000 bpd in the first quarter. 

The collective group of Saudi Arabia, Russia, UAE, Iraq,  Kuwait, Kazakhstan and Algeria were among the producers that said cuts would be unwound gradually after the first quarter in the event market conditions permit. 

Unique Facts about the recent OPEC meeting: 

One of the most important elements of the OPEC meeting would be extending its invitation to Brazil. Brazil is a top 10 producer to become a member of the group. The country’s energy minister said that it hoped to join in January. 

Another interesting fact that has to be taken into consideration is that the OPEC+ meeting coincided with the opening of the United Nations COP28 climate summit of which major countries were a part. It was hosted by OPEC member United Arab Emirates.

Future Outlook by Commodity Samachar :

The International Energy Agency (IEA)  this month had forecasted a slowdown in 2024 demand growth for the following reasons: 

  • Last phase of the pandemic economic rebound 
  • Advancing energy efficiency gains
  • Expanding on electric vehicle fleets

With all this out in the open, what’s the outlook on crude oil

Here’s a technical perspective from Ankit Kapoor, Head of Research at Commodity Samachar. 

“As per the latest news, crude oil production has been cut in the OPEC meeting, however, it wasn’t executed in such a way that prices of crude oil could be supported.

An expectation of a 5 million barrels production cut was on the horizon concerning the OPEC meeting, however, the cut was only 2.2 million barrels out of which has been extended. Overall the new output cut encompasses only 0.90 million barrels. 

From the technical analysis perspective, the position of retail traders was intimated to not be suggesting bullishness. 

For short terms traders, on the sharp rise in crude oil, sell positions between 6480 – 6550. Stop loss will be above 6700. Target will be 6200 and below this, a big fall could be witnessed. “

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