WTI Crude Oil

Oil Mixed As Traders Wait For U.S. Stimulus News

Oil Video 20.10.20.

OPEC+ Keeps The Production Cut Deal Intact

On Monday, OPEC+ monitoring committee met to discuss the latest developments in the oil market. Russian Energy Minister Alexander Novak stated that the committee recommended to fully comply with the current deal.

According to the current production cut deal, OPEC+ will increase its production by 2 million barrels per day (bpd) in January 2021.

In recent weeks, oil traders started to worry about the insufficient pace of the oil demand recovery. The second wave of coronavirus has already led to a new round of restrictive measures in Europe, and the market fears that these measures will put pressure on oil demand recovery.

In this situation, OPEC+ will have to decide whether it should change the deal and keep the current production cuts for a few more months.

While OPEC+ has signaled that it will proceed with the expected production increase as planned, the real decision will be made in December when OPEC+ energy ministers will meet to discuss the deal. Until then, OPEC+ will likely try to offer some verbal support to the market.

U.S. Stimulus Hopes Provide Support To Oil

On Tuesday, U.S. President Donald Trump stated that he would accept a new deal worth more than $2.2 trillion. This statement provided support to the U.S. stock market and put pressure on the U.S. dollar.

Meanwhile, the potential stimulus deal can provide material support to oil demand as it will support consumers and businesses. At this point, it looks like hopes for a new coronavirus aid package are among the main catalysts that keep oil near the $41 level.

Most analysts believe that the stimulus deal is inevitable, and the only question is whether Republicans and Democrats will be able to reach consensus ahead of November election.

The timing of the deal is important for the oil market because demand needs additional support right now. Analysts expect that today’s API Crude Oil Stock Change report will show that crude inventories decreased by 0.24 million barrels, but the downside trend in inventories could soon come to an end- the number of oil rigs in the U.S. is increasing which means that U.S. oil production will also increase in the near future.

For a look at all of today’s economic events, check out our economic calendar.