Oil has lost 1.7% since the start of the day on Tuesday, in addition to a more than 3% drop the day before, clearly showing the market's reaction to the OPEC+ meeting over the weekend. The technical picture in oil has turned very bearish.
Oil has lost 1.7% since the start of the day on Tuesday, in addition to a more than 3% drop the day before, clearly showing the market’s reaction to the OPEC+ meeting over the weekend. The technical picture in oil has turned very bearish. OPEC+ agreed to an impressive extension of low production quotas, but markets are paying more attention to the short-term supply-demand balance and viewed the move as underwhelming.
Earlier, we also pointed out that the cartel, especially Saudi Arabia and Russia, is becoming hawkish, preferring to give active signals or cut production when the price gets close to the 200-week average. This curve reflects ultra-long-term trends, averaging the price over almost four years. Oil has been receiving impressive support after touching this line in 2019 and 2023.
In 2020, the breakdown of this long-term support culminated in a hike in some oil contracts into negative territory. We saw just as much market drama in 2014 after a similar signal. It was perhaps only in 2018 that oil managed to turn to the upside, falling just 18% below its 200-week average.
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