Trade Idea: OPEC+ Meeting 2nd February and Oil Prices.
- Traders and delegates expect 400,000 barrel-a-day increase
- Market anxiety grows as OPEC spare capacity dwindles
OPEC and its allies are expected to approve another modest oil-output increase this week, yet once again struggle to deliver all of the extra supplies into a red-hot crude market.
The recovery in fuel consumption from the pandemic continues apace, leaving plenty of room for the 23-nation coalition led by Saudi Arabia and Russia to boost production. But members from Nigeria to Russia have been running out of spare capacity and struggling to revive their output after years of cuts and under-investment.
Even as delegates from about half the coalition’s members say they expect OPEC+ to ratify another 400,000 barrel-a-day supply hike for March, markets are tightening and propelling prices above $90 a barrel. All 16 respondents in a Bloomberg survey of traders, analysts and refiners also predicted an increase, but doubted it will be achieved in full. In November the group only implemented about 60%.
Only Saudi Arabia, the United Arab Emirates and Iraq have enough spare production capacity to deliver meaningful increases, Tornqvist said. For other members of the Organization of Petroleum Exporting Countries, depressed investment has taken its toll.
Angola’s aging deep-water fields are in decline, while Nigeria’s pipelines are plagued by leaks. Even Russia, the second-biggest member of the alliance, has been unable to increase in recent months following a decline in drilling.
With consumption bouncing back and production constrained elsewhere in the world, a global market that was expected to be in surplus this quarter could actually be under-supplied. Prices are already at the highest since 2014, gaining extra momentum from renewed geopolitical tensions. For some traders, a return to $100-a-barrel has taken on an air of inevitability.
Trade Idea:
Shortage of Oil and Inability by member states to fill in the gap of supply deficit heats up the market and pushes the price higher. As increase in Output that is expected to be announced tomorrow at 2nd February, is likely to be not enough for the market to fill the deficit. Leading Investment Bank - Goldman Sachs sees this variable as the key in future higher prices of black gold.
Price may pull back into support levels- giving a better price for a position as fundaments remains solid for continuation to upside as expected by the market.
Trade Example: Buy Position at support level of $88.05-10 of 10000 Units with conservative Take Profit of $92.85, would result in up to $48,000 of upside profit.
