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OPEC Latest: Crude Oil Price Set-Up Ahead of OPEC Meeting

OPEC Latest: Crude Oil Price Set-Up Ahead of OPEC Meeting

Justin McQueen, Analyst

Crude Oil Price Analysis & News

  • OPEC Meeting in Focus: How Much Will Production Increase?
  • Monitoring OPEC Developments
  • Brent Crude Oil Levels to Watch

OPEC Meeting in Focus

The first of today’s main risk events is the OPEC meeting where the oil cartel, alongside non-OPEC members, will look to ease production quotas following a brighter oil outlook, in part due to the success of the global vaccine rollouts, which in turn has prompted a sizeable rally in oil prices. The key question for today’s meeting is how much will oil production quotas be relaxed.

However, in light of yesterday’s OPEC source reports that a rollover of current production caps is on the table, there are now three potential outcomes.

  • The most likely scenario in my view is that OPEC+ will relax quotas by 500kbpd, delighting Russia who has been an advocate for boosting production, while Saudi Arabia unwinds their additional 1mpbd cut by 500kbpd also. This would be the least volatile outcome as it does not favour either bulls or bears in the short run.
  • The bull scenario would be the abovementioned rollover of existing cuts, which I see as the lowest probability outcome
  • The bear scenario in the short run would be for a 500kbpd increase by OPEC+ and Saudi Arabia to unwind the entirety of their additional cuts.

A reminder that following last months 20% increase in Brent crude prices, oil is now trading within close proximity to Saudi Arabia’s estimated fiscal breakeven price of $67/bbl, therefore, it is unlikely that Saudi in particular will want to put a stop to the current trend and thus remain cautious in their approach to bringing oil back onto the market. Alongside this, with the buzzword of a commodity supercycle doing the rounds, OPEC will be aware that speculative position would have played its part in boosting oil prices, making the physical oil complex appear healthier than is actually the case, further supporting that OPEC+ will boost production gradually.

Monitoring OPEC Developments

The meeting starts at 1300GMT, however, be mindful that there will be several sources doing the rounds ahead of the meeting and thus keep tabs on OOTT on Twitter and particularly tweets from OPEC watcher, Amena Bakr.

Oil - US Crude Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -6% 15% 1%
Weekly 7% 16% 10%
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Brent Crude Oil Levels to Watch

Oil prices have pulled back in recent sessions, which isn’t all too surprising given that the market is coming off a 20% gain in February, whereby prices had hit their highest level in a year and thus risk has been taken off the table ahead of the OPEC meeting. Alongside this, risk sentiment has also taken a hit over the past week amid concerns over a possible tightening in financial conditions, given the rally in global bond yields. In terms of levels in focus, immediate support resides at the 20DMA (63.44) with the 38.2% Fib retracement level below at 62.67. On the topside, 64.50 to 65.00 will be watched.

Brent Crude Chart: Daily Time Frame

OPEC Latest: Crude Oil Price Set-Up Ahead of OPEC Meeting

Source: Refinitiv

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