Oil Drops as OPEC Disappoints

The star commodity over the past 24 hours has to be crude oil whose prices slumped yesterday following the OPEC meeting and the announcements that followed the meeting. We had mentioned that all the eyes of the oil traders would be on the meeting yesterday as the market would be looking to see how the length and breadth of the production cut deal would be extended.

Oil Prices Likely to Remain Under Pressure

We have also been seeing that the oil prices were making steady progress over the last couple of weeks on the back of reports and news that said that the OPEC members would extend the deal by a much longer period than expected and would also deepen the production cuts in order to push the oil prices higher. And as is the tendency of the markets, the traders began to believe in these reports and sought to overrun the actual news by buying oil longs in anticipation of all these reports coming true. But the reality turned out to be much different.

The OPEC meeting concluded that they would indeed extend the production cut by 9 months but they also said that the production cut targets would remain the same as was initially planned. This was much lesser than what the markets had expected and with Libya and Iran maintaining the same conditions as before, the meeting was much more dovish than the markets expected and this led to a sell off in oil which pushed the oil prices from above $52 through below the important support of $50 and it now trades below $49 as of this writing. In the short term, the oil prices are likely to remain weak.

Gold prices continued to hold steady near the highs of the range and as we had mentioned in our forecast yesterday, we are likely to see the prices consolidate and range in this region as we approach a lean phase as far as economic and fundamental drivers are concerned. The pair seems to be stuck in a tight range for now and unless more clarity emerges about the June rate hike from Fed, we do not expect this pair to have a breakout in any specific direction.

Silver prices also had a quiet and slow day, in line with what the gold prices were doing as the prices consolidated just above the $17 waiting for the next direction from somewhere which would then decide the short term direction.