A Tug-Of-War Between OPEC+, Emerged Markets

The price of crude slipped ahead of an anticipated announcement by the U.S. on release of reserves, with OPEC+ warning that if consumers go ahead with the move, crude will not be restored to the market as much as it had been.

After rising nearly 1% on Monday, New York crude oil futures fell toward $76.8 a barrel. People familiar with the plans said that the U.S. may announce the release on Tuesday, along with other nations.

U.S oil had been declining since it formed a bearish engulfing candlestick about two weeks ago, when it was trading at $85 a barrel

During the time period August 22nd to October 25th, oil pulled back to 38.2% Fibonacci retracement.  On a 6 hours time frame, the price pattern targets the 50% retracement level from the same timeframe, which is also below $74 a barrel.

It would be an unprecedented effort by the world’s most powerful economy  to drive down prices in conjunction with India, Japan, and South Korea. In addition, China said it was tapping reserves.

It remains to be seen whether other nations announce simultaneous announcements, but if Biden can announce other nations are on board, including China and Japan, that is all the Announcement Effect needs.

White House officials are considering releasing 35 million barrels of oil over time, although the situation remains fluid and plans could change.

Potential SPR releases and further COVID-19 restrictions this winter might be enough to convince OPEC+ to pause supply increases

Under current market conditions, OPEC+ delegates think it is unjustified to release millions of barrels of oil. They may reconsider their plans to add more oil next week. Covid-19’s resurgence is raising concerns about demand in the U.S. and Europe.

In addition, the oil price situation is highly uncertain. As long as the whole thing isn’t just a battle to scare the traders and push down prices without actually going anywhere, it’s all too possible that President Biden will talk tomorrow about the economy and manage inflation, which will be a big topic.