OPEC Preview: Is Oil on its way to $100 even with a 400,000bpd increase?

OPEC+ meets on Wednesday to determine whether they should increase oil output by an additional 400,000 barrels per day in March, as planned. With rising tensions between Ukraine and Russia and with the price of WTI Crude Oil hovering near $88 and Brent Crude near $89.50, it would be difficult for them not to.

Russia continues to build up forces along the Ukraine border, amassing over 100,000 troops. NATO continues to build up troops in Eastern Europe as well, ready if needed. Russia claims to not want war, but to protect their security. Many countries have their doubts, including the UK , who said that it is highly likely that Russia is looking to invade Ukraine. If Russia does invade Ukraine, western countries have threatened sanctions. However, some believe Russia may withhold oil to counter. This uncertainty has been helping to drive up the price of oil.

In addition, it has been reported that some countries, such as Libya and Nigeria, have been unable to keep up with their quotas, thus adding to the supply side issues. Countries that produce a surplus, such as Saudi Arabia will need to provide more oil to the markets. Some traders are questioning how OEPC+ can raise output when OPEC+ can’t even keep up with current quotas.

On the demand side, raising output seems like the right thing to do. Economies are re-opening. In many countries, particularly in Europe, bans due to the Omicron variant are being lifted. Travel restrictions are also being eliminated. More people are able and willing to travel. With the summer driving season right around the corner, OPEC will need to make sure oil demands are met.

WTI crude made a low at 61.87 in August 2021 and bounced to 85.39. Price sold off again and retested the August lows on December 2^nd, 2021. WTI bounced once again and on January 18^th, it broke the previous highs at 85.39, putting the double bottom pattern in play. The target for the double bottom is the height from the bottom to the neckline, added to the breakout point of the neckline. This puts the target near 108.30. However, if price is to get there it must first pass through a confluence of resistance at previous lows in 2013/2014 and the 127.2% Fibonacci extension from the highs of October 25^th, 2021 to the lows of December 2^nd 2021, near 91.59. An upward sloping trendline crosses just above there near 92.50. The next resistance level is at the 161.8% Fibonacci extension from the same time period near 99.56. Support is at the recent lows below the neckline at 81.94, then previous resistance and the 50 Day moving Average near 76.76/76.78. Below there, support is at the 200 Day Moving Average at 73.32.

Source: Tradingview, Stone X

OPEC+ is likely to raise oil output this week by 400,000bpd as planned. However, will this be enough? With geopolitical tensions building in Russia, even an “as expected” result may not be able to keep oil prices from continuing to rise.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.