Crude Oil Prices Steady Above $58.00 After OPEC+ Announce Production Cuts

Earlier today, the Organization of Petroleum Exporting Countries (OPEC) and their partner countries announced that higher production cuts until March 2010. The existing agreement is for the cartel as a whole to cut back production by 1.2 million barrels per day. Now, in an effort to prop up oil prices, OPEC+ will now cut daily production by 1.7 million barrels per day.

There was very little reaction on crude oil prices following the announcement. WTI crude CFDs opened today’s trading at $58.27. As of this writing, the spot price of the commodity is trading just below $58.40.

The market’s muted reaction to the production cuts is quite interesting mainly because 500,000 is higher than what was expected. It had been earlier predicted that the cartel would only cut back as much as 300,000 barrels per day.

According to some analysts, the reason for the market’s response is due to the track record of some member countries. Russia, Iraq, and Nigeria have been known to produce more than what they should. In fact, there was skepticism that Russia might not even welcome the higher production cuts mandated by the cartel.

 

Crude Oil Price Outlook

On the 4-hour chart, we can see that crude oil prices have been unable to close above resistance at $58.58 since November 22. If market participants become convinced that OPEC+ member countries will strictly adhere to their new agreements, we could see crude oil prices trade higher to its July 12 highs at $60.82. On the other hand, if sellers dominate trading, WTI crude could fall to support around this week’s lows at $55.30.

 

By Angeline Feliciano, Market Strategist at Investingcube.com. Preferred Broker: ATFX UK

 

 

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