OPEC has been trying to stabilize the Oil markets ever since their “market share” strategy failed and the price dropped from 150 to the sub 30 levels. Their attempts to stabilize the markets succeeded only to a limited extent by pushing Oil to the 50+ levels but again, their antics with output cuts have been a failure so far. Now the Saudis are willing to cut more of their production in the interest of saving the oil markets.
Markets have a way of finding their equilibrium with or without such measures. Oil has been in a downtrend for the last three years. With the current US administration’s policy of going aggressively after every source of energy including coal, shale, solar and other alternative energy, OPEC & its leader Saudi Arabia most likely have realized they have lost the price war. Hence the current salvo – Saudis committing to more output cuts while reducing their exports to the USA. Will this measure succeed & take Oil higher or will Oil continue to languish as the US attempts to produce more oil & other forms of energy? Most likely the latter as the long term prospects for Oil are dimming.
While the long term fundamentals are not great, on the technical front, WTI needs to break-out above 55 to get out this 3 year bearish trend. The chart below might be of interest to the folks who have long term interests in WTI and to those trading Oil Futures & derivatives.