Since OPEC+ agreed to cut oil production, oil prices have seen an epic rally of 27%, marking a fresh 2019 high. The allies decided to cut daily production levels by 1.2 million barrels back in December in a bid to rebalance the market and lift the 2-year low prices.
However, crude lost a weighty 3% just yesterday. This came after President Trump publicly criticized OPEC for letting prices appreciate too high and too fast.
“Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!”, the US president wrote.
The tweet turned oil prices sharply lower, reversing earlier gains and tumbling some 3% by day’s end.
Prior to Trump’s tweet, however, a Goldman Sach’s analysts provided a possible appreciation outlook in prices. Venezuela’s disruptions supported the outlook in the lead up to OPEC’s scheduled April meeting.
“While prices could easily trade in a $70-$75 a barrel trading range, we believe such an environment would likely prove fleeting,” the Goldman analyst stated.
The cartel seems determined to sustain cuts, and even increase them. This is in hopes of rebalancing markets by April. In fact, Saudi Arabia recently indicated that cuts could reach 9.8 million barrels per day in March.
While the market tightens from cuts, sanctions on Iran and Venezuela are helping the 2019 outlook seem a little rosier. Perhaps, what adds on to Trump’s worries is that with the US-Sino trade talks on a more optimistic path, prices will most likely receive further support and subsequently attach more downside risks to global economies.
Saudi Aramco chief Amin Nasser retaliated earlier today. The chief stated that the gas and oil industries are facing a “crisis of perception,” as Trump’s tweet revealed the market’s vulnerability.
Technical Perspective
In the short-term, prices completed a full bearish wave near $55 per barrel and reversed for a potential upside correction. They may continue lower provided at least the S3 support gives in to bearish pressures. The bullish divergence biases formed on the RSI and MACD, however, remain intact as long as prices hold above the $55 handle.
