Market News & Analysis
Oil Rises As OPEC Poised To Extend Output Cuts
Fiona Cincotta July 1, 2019 1:56 PM
What we are seeing is just how keen OPEC are to keep prices underpinned, even at the sacrifice of loss of market share. The reward for the sacrifice has been immediately visible with the two main oil benchmarks, Brent and crude rallying over 2.5% in early trade.
The G20 meeting over the weekend had additional benefits for oil. An agreement by President Trump and China’s Xi Jinping to call a trade truce has boosted hopes of a trade agreement. Given the declining health of the world economy amid the ongoing trade dispute, traders are optimistic that a trade truce, leading to a trade agreement could put a halt to the global economic downturn, boosting demand for oil in the process.
Numerous opposing factors
OPEC cuts, elevated tensions in the Middle East plus sanctions on Iran and Venezuela are helping to underpin oil prices. Meanwhile rapidly expanding output from US shale, combined with concerns over the health of the global economy are keeping downward pressure on oil prices. Up to now these numerous opposing factors impacting the supply and demand of oil have been roughly balanced. However, they also make it difficult to predict what’s likely to happen next. Should OPEC cut and for longer than originally thought, this could give the oil bulls the upper hand for the coming months providing the US – Sino trade truce remains in place.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.