The Organization of the Petroleum Exporting Countries (OPEC) backed from a strong commitment to raise oil production but only promised to work together and stressed the need for continued cooperation between oil producers, as opposed to signaling an actual number on an expected production increase.
This has certainly been a rollercoaster trading week for financial markets thanks to geopolitical uncertainty and renewed trade war fears. Easing political tensions in Italy have rekindled risk appetite, ultimately resulting in global equity markets venturing higher.
Crude oil is mixed as strong market fundamentals are competing with trade and geopolitical uncertainty. If it isn’t enough to have to handicap how much OPEC and Non-OPEC producers will agree to raise output, you must balance that against political uncertainty in Europe and the fallout from steel and aluminum tariffs imposed by the Trump administration.
Saudi Arabia and Russia just destroyed the oil price rally, potentially putting an end to all the speculation about what the group might do next. But higher production doesn't necessarily mean higher oil prices are entirely out of the question, and in fact, the oil market is still faced with a ton of uncertainty.
Crude oil prices roared back after the Russia central bank sent signals that they were not very happy about the rapid drop in crude prices, and European markets bounced back as Italian political factions have decided to talk. This comes as there is more evidence that OPEC and Non-OPEC have achieved their goal of getting rid of the global petroleum glut.
In January 2015, WTI crude oil futures broke below its long-term trendline that dated back to the 1998 low of $10.65 per barrel after an eight-month sell-off that took crude from above $100 to below $50. On the last trading day of January 2015, crude oil rallied close to $3 in the last hour of trading to settle above that long-term trendline. We made a note of it at the time, which seemed to confirm the importance of this level.
Crude oil prices are still reeling from the threat that OPEC and Russia may raise output and fear that turmoil in Italy could cause larger problems in the Eurozone. This comes as sub-tropical Storm Alberto poured a lot of rain in Florida denting some gasoline demand. While it looks like the first hurdle of getting gasoline supplied by Memorial Day has cleared, the oil market will still be undersupplied even if OPEC and Russia add the amount of oil that they say they will.