Brent Crude Oil Calm Ahead of US Oil Rig Count Data
Over the weekend, oil-producing countries finalized a deal that would reduce output by almost 10 million barrels per day. This would directly reduce the supply of oil and was supposed to have a bullish effect on oil. However, WTI crude oil price is trading lower today following this development. As of this writing, WTI crude oil price is trading at $22.95, down from where it opened at $23.50.
After four days of negotiations, OPEC and its allies agreed to cut oil production by 9.7 million barrels per day. This marks the largest production cut in history, as oil-producing countries attempt to put a stop in sliding oil prices. The initial plan was to reduce by 10 million barrels per day which would amount to 10% of global supply. However, Mexico negotiated to only cut by 100,000 and not 400,000.
The production cuts will take effect from May 1 to the end of June. The announcement of reduced output may have failed to boost crude oil price because the move was already priced in by market participants. Rumors of the said reduction began circulating early last week. Therefore, the official announcement was not new information to investors.
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On the 4-hour time frame, it can be seen that WTI crude oil price CFDs is trading slightly below last week’s lows. It is also hovering around support at the 100 SMA. If sellers continue to dominate trading, the commodity could fall to the next support level at $19.06 where it bottomed on March 30. On the other hand, a rally to the highs of April 3 at $28.87 would effectively complete the inverse head and shoulders pattern. This is considered as a bullish reversal indicator that could hint at a bigger rally to the highs of March 11 at $36.25.