Crude Oil News Today: OPEC+, Russia Deepen Cuts Adding to Supply Tightness

OPEC+ Extends Cuts, Market Reacts

Oil prices saw a modest decline on Monday, following the OPEC+ decision to extend their output cuts. This move, expected by the market, led to a classic “buy the rumor, sell the fact” scenario, with Brent futures and U.S. West Texas Intermediate (WTI) both retreating after last week’s gains.

At 10:30 GMT, Light Crude Oil futures are trading $79.90, down $0.07 or -0.09%.

Supply Tightness Supports Prices

Despite the dip, the physical market remains tight. OPEC+’s sustained output reduction is a key factor, compounded by escalating tensions in the Middle East. These elements are underpinning crude oil’s overall strength.

OPEC+ Strategy and Russian Cuts

OPEC+ is maintaining its 2.2 million barrels per day cut into the next quarter, aiming to balance the market amidst global economic uncertainties and rising production outside the group. Notably, Russia announced an additional cut of 471,000 barrels per day, aligning with some OPEC+ nations, surprising analysts.

Market Indicators Show Tightening

Market structures indicate tightening supply. The Brent intermonth spread is widening, a clear sign of anticipated supply constraints. Backwardation in the market, where prompt prices surpass future month prices, reinforces this expectation.

OPEC+ Solidarity and Price Defense

The recent OPEC+ decision reflects strong internal cohesion and a determined stance to uphold prices above $80 per barrel in the coming quarter. This unity was uncertain after Angola’s exit from OPEC in November.

Geopolitical Tensions and Market Impact

The Israel-Hamas conflict and Houthi attacks on Red Sea shipping are significant geopolitical factors bolstering oil prices. However, concerns about global economic growth continue to exert downward pressure.

Short-term Market Forecast

Given the current market scenario, a bullish short-term outlook is justified. OPEC+’s continued production discipline, combined with geopolitical tensions and market indicators pointing to supply tightness, suggest upward price pressure.

Technical Analysis

Despite today’s slight setback, the Light Crude Oil Futures remain in a strong uptrend, having built a solid support base slightly above the 200-day moving average at $76.66.

In addition to the bullish long-term trend, the market is also well-above the 50-day moving average at $74.85. This is controlling the intermediate trend.

Should the market resume its uptrend later in the session, increased momentum could drive prices into the nearest static resistance level at $82.68.