Oil price caught between OPEC and geopolitics - Commerzbank

The Oil market is likely to be eagerly awaiting tomorrow's decision by the eight OPEC+ countries that have voluntarily cut their production. Following media reports that some delegates had already indicated that they would probably decide on a further significant increase in production, the Oil price had fallen. The actual announcement is therefore likely to have only a limited effect. The Oil price would probably only come under greater pressure if the Oil-producing countries were to increase their production even more than in previous months or give indications that there will be similarly high production increases in the following months, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Oil price is being supported by geopolitical factors

"However, the fact that OPEC+ has at its last meetings not wanted to commit itself in advance speaks against this, probably also to give some members -- above all Kazakhstan -- the opportunity to correct their previous overproduction. In our view, the failure of these countries to meet their production targets is the main reason why the eight OPEC+ countries, led by Saudi Arabia, have recently increased their production more than originally planned."

"Meanwhile, the Oil price is being supported by geopolitical factors. The US administration has renewed a US company's licence to produce Oil in Venezuela, allowing the company to maintain its operations there at a minimal level. At the same time, however, it has prohibited the company from exporting Oil. This is likely to have come as a disappointment to some market participants after a further extension of the previous production and export licence was discussed."

"In addition, US President Trump recently clearly criticised Russia's President Putin for the recent attacks on Ukraine and threatened new sanctions, which would most likely affect the energy sector there. In light of these developments, an early easing of energy sanctions, which still seemed possible a few weeks ago, is now hardly conceivable."