The Organisation of Petroleum Exporting Countries and its allies met today, 5 September, amid expectations of falling demand due to the global economic slowdown and the situation in China, which is suffering from bottlenecks caused by the coronavirus that is hampering economic growth.

Surprisingly, the cartel not only did it not maintain production but even reduced it by 100k barrels/day, WTI and Brent prices reacted immediately and increased by more than 3%.

Energy market analysts expected the current production quotas to be maintained, but did not exclude any decrease that actually materialized.

Saudi Arabia’s OPEC+ representative, Prince Abdulaziz bin Salman, said extreme volatility is making the futures market increasingly disconnected from fundamentals, and OPEC+ could be forced to cut production even more in the next meeting.

He went on to say that OPEC+ has the means and flexibility to deal with the challenges arising from the economic slowdown and recession in the West.

These comments recently triggered a rally in crude oil prices, which was quickly reversed, technically a bearish sign. The resistance level at $94.71 failed to be broken, despite Saudi Arabia’s statements pushing oil prices higher.

Benchmark oil futures have fallen more than 20% since early June on concerns about the outlook for the global economy and the possibility of more Iranian oil coming to market. This would add about 1 million barrels a day to the market, which would increase downward pressure on the price.

Story based on an analysis by Miguel A. Rodriguez – Financial Markets Expert CAPEX.com