OPEC Up Next
The big focus for markets today, away from any Omicron updates, is the OPEC+ meeting taking place in Algeria. The meeting has been called in order for OPEC and a group of non-OPEC producer nations led by Russia to discuss how the Omicron variant is likely to impact oil demand and oil prices, as well as making a decision on oil output levels going forward.
Over recent months, OPEC has been steadfastly committed to maintaining a gradual increase in production levels. Indeed, over the last month the group has resisted calls from president Biden to step up production in order to bring oil prices down amidst the energy crisis.
However, in light of the more than 20% correction we have just seen in oil prices the focus now is on whether there is any sign that OPEC might actual scale production back once again, in a bid to boost prices. If OPEC keeps output at current levels, this will likely be oil negative in the near term (focus remains on Omicron), if they hike oil output, this will be oil negative too. However, if they surprise by scaling back, this would take markets by surprise, fuelling a rally in oil prices.
The slide in oil prices have taken the market down to support at the 65.52 level. Any disappointment from today’s meeting or dire warnings over Omicron could easily fuel a move lower towards 60.55 next. On the upside, any surprise cut in production would likely see the market retesting the broken bull channel low and 74.46 level above.