OPEC members and Russia (OPEC+) held a ministerial meeting on Wednesday. The virtual meeting was held to monitor the group’s oil supply reduction agreement and report on whether members were in compliance with production limits. OPEC has been cutting production since May, in response to the sharp drop in global demand for oil in the wake of Covid-19. This move is an effort by OPEC to stabilize the price of oil, which nose-dived 48% in March and came close to USD11.00 a barrel in April. Oil prices have since recovered, with Brent oil trading just below USD 45.00.
In contrast to these sharp fluctuations several months ago, oil prices have been relatively steady since the end of June. The ministerial meeting, which was little more than a self pat on the back, did not shake up sleepy oil prices. Russian energy minister Alexander Novak said that compliance in July reached 95%, and that the decision to taper cuts on August 1 (from 7.7. billion bpd to 9.7 billion bdp) was a correct one. The other major player, Saudi Arabia, warned at the meeting that production cuts could continue into 2022.Unless Covid-19 mounts a major comeback and paralyses major economies, it would seem that OPEC has found a formula to prevent oil prices from taking another plunge in 2020.
USD/BRO is currently trading at USD44.80, down 0.82% on the day. The pair lost ground in the Asian session and has steadied in European trade
- There is resistance at 45.64, followed by resistance at 45.90
- USD/BRO broke below support at 44.96 in the Asian session. The next support line is at 44.54
- The 10-day MA, situated at 44.64, remains under pressure. If the pair breaks belows this line, it is a bearish signal
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