WTI oil: how to trade the OPEC+ meeting

Information is not investment advice

Disposition

OPEC+ is just about to meet – the series of sessions starts later today. Iran will be there, Russia will be there – that is, apart from the primary cartel member countries such as Saudi Arabia. As they agreed before, they’ll be meeting discuss the plans of future supply. Specifically, in view of the recovering global oil demand, the question is how much oil supply needs to be restored.

Saudi Arabia is on the side of a cautious approach, with a 500,000 bpd suggested increase for the coming months. However, many other countries – primarily, Russia – hold a stronger supply position for a number of reasons from not letting the US shale producers take over the niche to a blunt desire to extract more oil profits. This last view suggests increasing the supply by 1.5mln bpd.

How to trade it

First of all, keep in mind that you’re trading emotions here. That means, you trade short-term. In the long-term, supply and demand will meet somewhere and stabilize – that’s the interest of all sides. So, we are speaking only about the short-term.

Meaning, there will be investors and traders out there, watching the OPEC+ meeting, and if OPEC+ decides to make a little supply increase, they may think, “Oh, so they’re not going to pump oil into the market – the price will rise then”, and the price will eventually rise because most of them think it will and will behave accordingly.

Otherwise, if the OPEC+ meeting ends with the maximum expected output increase, observers may think, ‘Wow, the market is about to be flooded with oil, the price will plunge – time to see’. So, they’ll start selling because they think everyone else already does that. Eventually, the price will drop.

Action plan

Listen to general outlook comments

if the demand expectations are cloudy, that’ll press on the price downwards
if the demand estimations are upbeat, that’ll spur the price to the upside

Prepare to hear the quantity supply increase

if the increase will be minimal/500,000 bpd, the price will keep going upwards/no turbulence
if the increase will be big/1,500,000 bpd, the price will drop in the short-term

Keep in mind

The price has already made a considerable drop - it dipped below $60 dropping out of the recent uptrend. There is a high likelihood that this local low will press on the meeting members to favor the cautious supply increase approach over aggressive stance.

FBS Analyst Team

More by this author

Similar

29.03.2023 12:34 Best Trade Ideas for April

I know we've had quite an amazing run these past few month, with over 78% accuracy in our trade ideas and sentiments, and thousands of pips in profits monthly...

fundamental analysis gbp market forecast nzd - new zealand dollar technical analysis cad - canadian dollar usd forex signals gold xau

28.03.2023 13:55 CAD Might Weaken As Oil Market Plunges

Futures for Canada's main stock index rose on Monday, following positive global markets and gains in crude oil prices. First Citizens BancShares Inc's announcement of purchasing the loans and deposits of failed Silicon Valley Bank also boosted investor confidence in the global financial system...

fundamental analysis boc - bank of canada market forecast technical analysis cad - canadian dollar forex signals

24.03.2023 18:43 Bitcoin & Gold - Safe Haven Amid Bank Crisis

Investor confidence in the global financial system has been shaken by the collapse of Silicon Valley Bank and Credit Suisse. As a result, many are turning to bearer assets, such as gold and bitcoin, to store value outside of the system without...

fundamental analysis market forecast technical analysis usd forex signals gold

Hold onto your hats, folks! The Japanese yen took a nosedive after the Bank of Japan (BOJ) left its ultra-loose policy settings unchanged, including its closely watched yield curve control (YCC) policy. But wait, there's more! The BOJ also removed its forward guidance, which had previously pledged to keep interest rates at current or lower levels. So, what's the scoop? Market expectations had been subdued going into the meeting, but some were still hoping for tweaks to the forward guidance to prepare for an eventual exit from the bank's massive stimulus

fundamental analysis market forecast jpy - japanese yen technical analysis usd forex signals aud - australian dollar

Choose your payment system

Phone number

Select the best time for us to call you.

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.