đŸȘ Cookies

We use cookies to store, access and process personal data to give you the best online experience. By clicking Accept Cookies you consent to storing all cookies and ensure best website performance. You can modify cookie preferences or withdraw consent by clicking Cookie Settings. To find out more about cookies and purposes, read our Cookie Policy and Privacy Notice.

Cookies settings


Cookie Control

What are cookies?

Cookies are small text files that enable us, and our service provides to uniquely identify your browser or device. Cookies normally work by assigning a unique number to your device and are stored on your browser by the websites that you visit as well as third-party service providers for those website. By the term cookies other technologies as SDKs, pixels and local storage are to be considered.


If Enabled

We may recognize you as a customer which enables customized services, content and advertising, services effectiveness and device recognition for enhanced security
We may improve your experience based on your previous session
We can keep track of your preferences and personalize services
We can improve the performance of Website.


If Disabled

We won't be able to remember your previous sessions, that won't allow us to tailor the website according to your preferences
Some features might not be available and user experience reduced without cookies


Strictly necessary means that essential functions of the Website can not be provided without using them. Because these cookies are essential for the properly working and secure of Website features and services, you cannot opt-out of using these technologies. You can still block them within your browser, but it might cause the disfunction of basic website features.

  • Setting privacy preferences
  • Secure log in
  • Secure connection during the usage of services
  • Filling forms

Analytics and performance tracking technologies to analyze how you use the Website.

  • Most viewed pages
  • Interaction with content
  • Error analysis
  • Testing and Measuring various design effectivity

The Website may use third-party advertising and marketing technologies.

  • Promote our services on other platforms and websites
  • Measure the effectiveness of our campaigns

Your retention will contact you in a few minutes with more information about this trading strategy.
ozios_close

{{ requiredField }}

{{ validEmail }}

{{ item.name }}
{{ item.dial_code }}

{{ validPhone }}

Your message was sent
Too many tries. Try in 2 minutes
locked content icon
This content is locked
to unlock it
return icon
Return
Return

OPEC+ extends oil production curbs. Will it help to increase the price?

The oil market has been quite volatile in recent months, mainly due to the unrest in the Middle East. However, its price remains at relatively low levels. The Organisation of the Petroleum Exporting Countries (OPEC+) has now agreed to extend production curbs, which were primarily aimed at pushing up prices. The anticipated start of production increases is thus postponed from December to the new year. Where should black gold go from here?

What is OPEC+?

The Organisation of Petroleum Exporting Countries (OPEC) was formed in 1960 on the initiative of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, who wanted to gain more control over oil prices. In the 1970s, OPEC consolidated its influence when it sharply cut production during the oil crisis, dramatically raising prices. This period sparked an oil shock with global economic consequences, and at the same time strengthened its market position. In 2016, OPEC joined with other major producers such as Russia to form a broader alliance known as OPEC+. It aims to regulate oil supply even more effectively and reduce market fluctuations. Joint agreements on production limits have shown the cartel's effectiveness in stabilising prices, giving the alliance global importance not only in the oil sector but also in geopolitics.

Postponing the resumption of oil production increases

OPEC+ agreed on Sunday 3 November 2024 to extend its production curbs, meaning the expected deadline is now pushed back from December 2024 to early 2025. This gradual easing was expected to bring an increase in daily production of 180 thousand barrels. The extension of the measures is a response to low oil prices caused by weak global demand, especially in China, the world's largest consumer. Demand has also been lower in the US this year, leading to a rise in global inventories. The conflict in the Middle East has also not put significant upward pressure on prices. However, following OPEC's decision on Sunday, WTI and Brent crude oil futures prices increased slightly and remained at these levels on the eve of the US presidential election. * However, their increase only erased losses from the previous week, when the oil price was at multi-week lows.

Snímek obrazovky 2024-11-06 v 13.58.53

The evolution of the price of the WTI crude oil futures contract for delivery in December 2024 over the last 5 years. (Source: oilprice.com)*

Snímek obrazovky 2024-11-06 v 13.59.22

Price development of the Brent crude oil futures contract for delivery in January 2025 over the last 5 years. (Source: oilprice.com)*

Weak demand from major buyers

In the first week of November, there were several events that were to take place that could determine the short-term, but also the long-term direction of the oil market. Apart from the US presidential election, which was the most important, the US Fed's decision on interest rates was also expected. The easing of monetary policy could gradually weaken the USD over the next few months and, as it is the main currency in oil trading, could push the price upwards. [1] However, in the US, production is expected to increase in the future, so combined with high inventories, oil could ultimately become cheaper.2 In the same week, economic data from China was also on the agenda, namely the trade balance and the inflation rate for the past month. Weaker industrial activity in that country over the past few months has led to lower consumption of various commodities, including black gold. The negative sentiment has not yet been helped by the government's announced stimulus, as the extent of the stimulus is unclear apart from the 0.25% interest rate cut in October.[1][2]

Canada wants to limit emissions

The gradual transition of countries to a green economy, which means phasing out fossil fuels, of which oil is clearly one, is also playing an important role in the oil market. Such moves are largely unpalatable to suppliers and industrialists who depend on fossil fuels for their livelihoods, whether they are individual companies or entire countries and groupings. A case in point is Canada, which on Monday 4 November 2024 published draft regulations to limit greenhouse gases from the oil and gas industry. The goal is to reduce total emissions from this sector by 35% by 2030 compared to 2019. The proposal has sparked a wave of criticism from industry producers who have warned that it will bring with it job threats, a decline in production and an overall weakening of the Canadian economy. However, the government said the main concern is that these manufacturers invest in more environmentally friendly technologies. The trend towards reducing global emissions is therefore contributing to the long-term global weakening of demand for oil. [3]

Market risks

From the point of view of investors betting on the value of oil to rise, there is a risk in the form of a possible surplus next year. Indeed, if OPEC+ members end their efforts to curb supply, this could cause a collapse in black gold prices. [3] The uncertainty was recently reflected, for example, when Saudi Arabia, the world's largest supplier of the commodity, abandoned its target price of USD 100 per barrel. The country wants to focus on regaining market share rather than raising prices. Other member countries could follow Saudi Arabia's lead, with a situation similar to 2014-2016, when OPEC flooded the market with oil and prices collapsed to below USD 30 per barrel. [4] In the shorter term, however, there is also the risk of widespread conflicts in the Middle East or Ukraine, which could restrict oil supplies and, in turn, drive up prices in the short term.[4] [5]

Adam Austera, Senior Analyst at Ozios

* Past performance is no guarantee of future results

[1], [2], [3], [4], [5] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

 


[1] https://www.investing.com/news/commodities-news/oil-prices-rally-15-as-opec-delays-production-hike-3698646

[2] https://www.investing.com/news/commodities-news/oil-edges-down-ahead-of-us-election-china-npc-meeting-3701029

[3] https://www.investing.com/news/world-news/canada-proposes-sharp-cut-in-oil-and-gas-sector-emissions-by-2030-3700780

[4] https://www.tradingnews.com/news/oil-prices-struggle-opec-output-increase-and-weak-demand-push-brent-below-72

Disclaimer:

The material herein is considered as marketing communication under the relevant laws and regulations, and as such is not a subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and should not be construed as containing investment advice, or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. The published content is intended for educational/informational purposes only. It does not take into account readers’ financial situation, personal experience or investment objectives. APME FX Trading Europe Ltd makes no representation that the information provided is accurate, current or complete; and therefore, assumes no liability for any losses arising from investments based on the supplied content. The past performance is not a guarantee of future results.

Google is one step further on the road to mastering quantum computing

The oil market has been quite volatile in recent months, mainly due to the unrest in the Middle East. However, its price remains at relatively low levels. The Organisation of...

Volkswagen copes with high costs and switch to electric cars

The oil market has been quite volatile in recent months, mainly due to the unrest in the Middle East. However, its price remains at relatively low levels. The Organisation of...

Nvidia continues to shape the future of AI and data centres

The oil market has been quite volatile in recent months, mainly due to the unrest in the Middle East. However, its price remains at relatively low levels. The Organisation of...
© 2024 APME FX TRADING EUROPE LTD

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.99% of retail investor' accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read our Risk Disclosures.