CRUDE OIL (LCOc1) ANALYSIS
- OPEC+: UAE and Saudi dispute prolongs uncertainty
- Tensions expected to intensify between U.S. and Iraq – bombing Iranian militants
- Bearish engulfing candlestick pattern unfolding as predicted
CRUDE OIL FUNDAMENTAL BACKDROP
After a strong start to the week, crude oil prices[1] stumbled after the Organization of the Petroleum Exporting Countries including Russia (OPEC+) failed to come to an agreement regarding output increases. This may result in member states taking matters into their own hands and raising output regardless of the OPEC+ accord. A case of rejection for current restrictions could mean further depreciation of crude prices going forward.
SAUDI ARABIA AND UNITED ARAB EMIRATES RIFT COULD RESULT IN DEREGULATION
The UAE and Saudi Arabia are at loggerheads after Saudi Arabia declined the UAE’s requests to increase output as per the current agreement, meaning output will remain at current levels (see current supply below). Forecasted figures as highlighted below for Q3 2021 shows the massive spike in output from 30.90mbpd to 33.31mbpd which has not yet been put into action. Further clarity on U.S. crude inventories will be announced later today (10:30 ET) via the U.S. Energy Information Administration (EIA) Petroleum Status Report[2].
OPEC Supply (2020 Q1 – 2022 Q4):
Source: Refinitiv
Logically, the continuation of restricted supply should see crude prices push higher but in this case market participants are hesitant because a potential breakdown between oil[3] producers (and potentially OPEC) could be disastrous. Russia has entered discussions and is acting in a mediatory capacity between the two distressed nations in hopes of a resolution.
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STRONG IRAQ OUTPUT MAY BE DISRUPTED BY ESCALATING TENSIONS WITH U.S. FORCES
Iraq has been incrementally
