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James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower shortly before the regular session opening after giving back earlier gains. The price action remains sluggish, however, with sellers limiting gains because of concerns over weakening demand, and buyers underpinning the market on the hopes of lower production from OPEC.

At 10:14 GMT, September WTI crude oil is at $54.86, down $0.07 or -0.15% and October Brent crude oil is trading $58.48, down $0.09 or -0.15%.

The trade is also slow as traders roll over from the September to the October futures contract.

Traders Hope OPEC Production Cuts Stop Price Slide

OPEC has been supporting prices since it along with other non-OPEC producers agreed to cut 1.2 million barrels per day (bpd). However, a combination of increasing U.S. production, and weakening oil demand growth due to the trade dispute between the United States and China have been a drag on oil prices.

Traders are hoping OPEC and its allies will agree to further cuts to help prop up prices.

“Although the outlook remains bleak, oil prices have remained anchored this week after a rapid response from Saudi Arabia, who is serious about stepping in to defend the oil price,” Stephen Innes, managing partner at VM Markets said in a note.

Late last week, Saudi Arabia helped support prices when it said it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories.

Furthermore Kuwait on Monday also reiterated its commitment to its OPEC+ supply curbs after Oil Minister Khaled al-Fadhel said Kuwait had cut its own output by more than required by the agreement.

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Saudi Arabia Has an Incentive

Saudi Arabia plans to float Saudi Aramco, in what could be the world’s largest initial public offering (IPO) so it needs to support prices ahead of its IPO. The Saudi’s could prompt OPEC and its allies to act aggressively to stem the price slide.

Daily Forecast

The hope of OPEC production cuts is likely to continue to support prices, however, unless there is evidence of progress in U.S.-China trade negotiations, gains will be limited.

Look for volatility later in the session at 20:30 GMT when the American Petroleum Institute (API) releases its weekly inventory report. Bullish traders are hoping for a drawdown.

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