FxWirePro: Oil price movements suggest 9-month extension was fully priced in

Last night, despite opposition from Russia, OPEC and non-OPEC participating countries could agree to extend the current production deal, which was first agreed to in November 2016 for another nine months. This is the second 9 months extension given to the agreement after initial six-month tenure expired in June this year. Russian energy minister Alexander Novak was against announcing such a long extension so early when the current agreement wouldn’t have expired until the end of March next year. Just days before the meeting, Russian economy minister had announced that the OPEC agreement is hurting country’s growth by limiting crude oil output, which in turn reduces investments in the sector. Due to Russian reservation, OPEC added though the deal was extended, there could be early exit if the market overheats.

Despite the agreement, the oil price failed to make much of a move on either side, which suggests that a 9-month extension from the OPEC was fully priced in. With the deal extended until the end of next year, the focus will turn to the below-mentioned factors,

• Oil inventories and global oil supply/demand
• U.S. oil production
• Speculative positions in oil contracts

Both WTI and Brent are down this week. WTI is currently trading at $57.8 per barrel and Brent at $5.4 per barrel premium to WTI.