With the OPEC meeting coming to an end on Friday, after lengthy discussions, oil prices rose at the announcement of the long awaited decision.
OPEC+ agreed that there would be oil production cuts of around 1.2 million barrels per day (bpd), with OPEC members cutting production by 800k bpd and the rest by non OPEC members.
The production cuts are to come into effect from January on and Russia seems to plan curbing production in a gradual manner with low cuts on January and raising the cuts in coming months.
The OPEC decision was reached despite pressure being exercised by US president Trump, which was faced mostly by Saudi Arabia as the main force behind the OPEC group.
Saudi energy minister, stated that he discussed the situation of the oil market with his US counterpart, after the OPEC meeting, also discussing cooperation opportunities in the Kingdom’s efforts for new technologies.
On other news, it should be noted that there could be plans to stabilize further the cooperation of OPEC and non-OPEC members, as United Arab Emirates (UAE) minister of energy stated the OPEC and Non-OPEC countries could be signing a general cooperation agreement as early as in three months.
UAE’s energy minister also stated that Qatar’s exit from OPEC is not expected to affect oil production.
Moving on to Iran, media reported that Iranian president Hassan Rouhani, stated that exports of Iranian oil have improved since early November and in addition to that, European Union’s foreign policy chief Mogherini said on Monday, that a system to facilitate non-dollar trade with Iran and circumvent U.S. sanctions could be in place by year’s end.
Also the production cuts decided by OPEC+, could provide a boost in Iran’s profitability and counter the effects partially of the US sanctions.
The supply side of the oil equation could be getting a further boost as Iraq has announced that it has increased production at the Halfaya oilfield by 100.000 bpd.
Iraqi Oil minister Thamer Ghaliban, stated that he expects oil prices to rise over time, as the OPEC decision will start affecting the oil market.
Further to the west, disruption in Libyan crude exports occurred after a local militia took control of the country’s largest oilfield (El Sharara), pushing oil prices even higher recently.
The loss of production is estimated to be around 315.00 bpd from the El Sharara oilfield and an additional production loss of 73.000 barrels per day from the El Feel oilfield.
It should be noted that the UN support mission in Libya called the armed militia to withdraw from the oilfield, however with little success so far.
On the other side of the world, the EIA announced that the US could be ending 2018 as the world’s largest oil producer with a record output of 10.88 million bpd.
Also the agency expects oil production to rise even further in 2019 reaching an average of 12.06 million bpd.
Such a development could strengthen even further the supply chain for oil, especially considering that for the first time in 75 years the US has turned to an oil net exporter .
With such boosts in supply, as the US shale oil production is rising and the sanctions on Iran could prove to be too soft, we could see the market’s attention turning to the demand side.
Worries about oil demand increase, as arguments of a possible global slowdown in 2019 multiply over time.
Should the two of them be combined, that would leave OPEC production cuts defending oil prices alone against a possibly oversupplied market in 2019 and the question is if the cuts are going to prove sufficient.
Despite Oil prices jumping last Friday, upon the announcement of the OPEC decision, they were not able to break the 54.15 (R1) resistance line.
The commodity’s prices, moved in a rather tight range, after the market corrected the OPEC effect, at remaining near the 52.10 (S1) support line with Wednesday morning breaking just above it.
Should the bulls take over the direction of the commodity’s price action, we could see them climbing and breaking the 54.15 (R1) resistance level, aiming for higher grounds.
If on the other hand the bears dictate the pair’s direction, we could see them breaking the 52.10 (S1) and aim if not break the 49.40 (S2) support barrier.