U.S. West Texas Intermediate is trading higher on Friday after OPEC and other major oil producers agreed on oil production levels starting from July. The intraday spike to the upside actually changed the main trend to up on the daily chart.
According to reports, the allied partners will aim to increase production to about 1 million barrels per day (bpd). However, reports went on to say that this figure represents about two-thirds of Saudi Arabia’s initial request.
Traders are saying the cartel settled on the 1 million barrel figure because some OPEC members would be unable to sufficiently ramp up crude production. Therefore, the increase in output may actually turnout to be between 600,000 to 800,000 bpd.
The rally on Friday is being fueled by short-covering, position-squaring and some speculative buying because some traders had been pricing in a little more than a 1 million barrel increase. Furthermore, OPEC is not expected to actually release a hard target, but many traders expect the real figure to remain well-below the 1.8 million barrels already being removed from the market.
Another reason for the bullish response is that recent figures show that production has fallen recently by about 2.8 million bpd so even with a 1 million barrel increase, there is still going to be a shortfall in the market.
Additionally, Saudi Energy Minister Khalid al-Falih said Friday morning that no-one should expect to see an “immediate flood”…