Oil prices drop even as OPEC+ cuts output

Oil prices plummeted on Thursday, with WTI price dropping to the $75.0 per barrel level. If WTI price declines, it may encounter support near $72.4 per barrel, while resistance may be found near $79.6 per barrel.

Oil prices plummeted on Thursday even as OPEC announced fresh production cuts in an attempt to maintain oil prices above the $80 a barrel mark. At the opening of the OPEC+ meeting on Thursday, it was announced that Brazil would be joining the organization. 

OPEC+ producers agreed to approximately 2 million bpd of voluntary cuts, extending already existing output cuts into the first quarter of 2024 and adding even more. As output cuts will be voluntary, however, it was left to each country individually to announce its production cuts. There are clear signs of dissent between OPEC+ members. Oil prices plunged after the meeting as markets were left unconvinced that the organization would maintain the output cuts.

Global economic concerns are dampening the oil demand outlook, putting pressure on oil prices. Oil prices are also kept in check by a strong US dollar and high-interest rates. Most major central banks, however, are hitting pause on rate hikes, boosting oil prices. FOMC members have voted to keep interest rates unchanged at a target range of 5.25% to 5.50%. 

The Fed’s approach remains largely data-driven and will depend on how fast inflationary pressures may ease in the next months. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

TRADE WTI

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Written by:
Myrsini Giannouli

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