OPEC+ Reach Deal to Raise Oil Production, Oil Rise!(With trading strategy)

OPEC and non-OPEC allies, after days of tense discussions, agreed on Thursday to increase production by 500,000 barrels per day beginning in January. 

Following the meeting, the oil rise over 1%. 

On Friday, the U.S. West Texas Intermediate (W.T.I.) crude was at $46.418 barrel, rose 1.63%, Brent was up to $49.528 a barrel, rose1.73% by 11:50(GMT+8).

“500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.

What caused the impasse?

OPEC kingpin Saudi Arabia was thought to be the main advocate of keeping the current level of cuts in place until the end of the first quarter. However, some producers questioned this approach following a sustained rally in oil prices last month.

Analysts believe some non-OPEC allies, such as Russian and Kazakhstan, have been calling for a gradual increase to production curbs, whereas the United Arab Emirates has ostensibly been pushing for a strategy designed to improve compliance from overproducing countries.

Speculation of a rift between Saudi Arabia and the U.A.E. earlier this week came as a surprise to some because of the U.A.E.’s stature within OPEC. It is the group’s third-biggest producer and a close Gulf ally of Saudi Arabia.

“Surprisingly this time, it was not a discord between Russia and Saudi Arabia that prevented the group from reaching a clear agreement on whether to delay the planned production increase,” Ole Hansen, head of commodity strategy a Saxo Bank, said in a research note.

“Instead a perhaps more dangerous divide, from an OPEC stability perspective, has emerged between Saudi Arabia and the U.A.E., two G.C.C. countries that normally speak with one voice.”

Before the final round of talks, Hansen had said failure to reach an agreement on Thursday could send oil prices lower “by several dollars,” before adding the bank believes the “cracks will be repaired ” because anything short of an agreement to postpone would be OPEC+ shooting itself in the foot. 

‘Much more difficult to strike a compromise’

Russia and nine other non-OPEC countries have been working with the 13-member group to prop up oil prices in recent years. The group exerts considerable influence over world energy markets, although it is no longer seen as the force it once was.

In recent months, OPEC+ has sought to navigate its way through a historically tumultuous period, including an unparalleled collapse in oil prices, a massive fuel demand shock amid the coronavirus crisis, a Saudi-Russia price war and Qatar’s departure from OPEC.

“OPEC+ controls almost 50% of the global production,” Tamas Varga, senior analyst at P.V.M. Oil Associates, said in a research note Thursday. “This privilege, however, comes with a burden (and) it has been laid bare this week.”

“It is much more difficult to strike a compromise with 23 participants, whose targets are not necessarily aligned, than with 13 countries,” he continued.

“Despite disagreements and differing views one thing seems certain: it is in the best interest of all involved to arrive at a mutually acceptable solution – sometimes choosing the least worst option is the only escape.”

Trading Strategy (source: Trading Central)

Pivot: 45.60

Our preference: long positions above 45.60 with targets at 47.05 & 47.45 in extension.

Alternative scenario: below 45.60 look for further downside with 45.05 & 44.65 as targets.

Comment: the RSI is bullish and calls for further upside.

Supports and resistances:

47.85

47.45

47.05

46.42 Last

45.60

45.05

44.65

Pivot: 48.75

Our preference: long positions above 48.75 with targets at 50.45 & 51.00 in extension.

Alternative scenario: below 48.75 look for further downside with 48.15 & 47.70 as targets.

Comment: the RSI is bullish and calls for further advance.

Supports and resistances:

51.55

51.00

50.45

49.62 Last

48.75

48.15

47.70

Guideline for Trading Central strategy 

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart: ·30MIN and 1H chart shows the trading suggestions for intraday ·Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators: Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference. 

4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.