Oil Market ahead of 27th OPEC and non-OPEC Ministerial Meeting
27th OPEC and non-OPEC Ministerial Meeting will behold via videoconference on March 31. The market situation ahead of this meeting is very important, and for sure the latest developments in the Russia- Ukrain peace talk also, will be in the focus by OPEC+ members, to have a better decision.
Today, and so far, Asia Pacific stocks are gaining as last night wall street closed higher, and according to the reports, both Russian And Ukrainian negotiators have flown to Istanbul, and the talk will start at 10 AM local time (7 AM GMT).
Japan’s Nikkei 225 gained 1.1%, supported not just by overall positive sentiment in the market, also by the jobs/application ratio at 1.21 in February and the unemployment rate at 2.7%.
Hong Kong’s Hang Seng Index also was up 0.8%, but China’s Shanghai Composite inched lost more than 0.3% as the latest Covid spread made more restrictions there.
Last night on Wall Street, the situation was not that good. However, tech stocks helped the S&P 500 to rally for the third day. Among other markets, US treasuries were mixed, Two-year yields resuming an upward trend on bets that the Federal Reserve will aggressively hike interest rates, while 10-years yields are a bit lower from yesterday's peak above 2.5%, down to 2.47%. And US dollar index also is down to almost 99, from yesterday's peak above 99.35.
After all mentioned changes, the oil market suffered short-selling overnight, with US crude falling more than 8% under $103 a barrel, while Brent crude fell more than 7% to $106.37 a barrel.
We can name different reasons that have contributed to the recent pullback in oil prices, including the re-imposition of lockdown measures in Shanghai, China due to the latest outbreak of Covid infection and fast spread, and the Chinese zero-covid policy. These restrictions in China, which ended with the closing up of many factories of activities, have disrupted global supply chains and further reduced demand for energy.
On top of that, Yemen's Houthis' 3-day unilateral cease-fire entry is going to end, which increase the market risk, especially around Saudi Arabia, one of the main global oil exporter. On the other hand, the UAE has emphasized that it will not separate from OPEC+ to increase production alone, and OPEC+ may also have no intention of changing the current plan. According to sources, OPEC and non-OPEC countries are producing 680,000 bpd and 373,000 bpd less than their quotas. Last month, OPEC members increased production by 266,000 barrels per day to 24.1 million barrels, while non-OPEC countries increased production by 57,000 barrels per day to 15.7Mbpd.
It is worth noting that after Western sanctions, Russia's oil exports fell by 26.4% in the week from March 17 to 23. The sharply reduced supply may have a substantial impact on the oil market in the short term. According to Kremlin spokesman Dmitry Peskov, Russia may consider shifting its focus to the Asian market, "no longer centered on Europe."
What we can see in the market is that different factors are there, which can lift the prices, while many other factors also will put the price under pressure. However, expecting more fall in the prices is more unlikely than the possible increase in prices. The price of about 90-110 US dollars seems like a fair price for now.
From the technical point of view, 20 DMA at 108 US dollars is a strong resistance, which can be the upper line of the range, while $100, and then at $92, are where we can set the support levels. I am currently putting my lower line of this price range at $92. Also, the trend line in the Daily chart, shows that as long as the price moves above $100, bulls have the market control.
