Oil Rises As Production Cuts Are Kicking In

Oil prices are set for a weekly gain, which would mark the first closure in the green seen in three weeks. WTI crude oil at the time of writing is trading up some 15% for the week, after initially being firmly on the back foot.

The decent bounce observed this week could be the market's way of acknowledging the commence of production cuts by OPEC and allies. These were due to start cutting today - Friday, after agreeing in April to reduce output by 9.7m barrels a day in May and June.

It comes following the oil prices dropping around 60 percent in 2020, having reached a 21-year low last month. The moves were as a result of the coronavirus pandemic squeezing demand and OPEC+ who failed to take action earlier.

As economies start to further ease their lockdown measures, the demand for oil will start to gradually pick back up again, thus supporting prices. However, the sustainability for the current rise is very much likely to be a question. OPEC and allies will have to consider greater action, which has been talked about by some officials.

Technical view

As can be observed via the weekly chart for WTI crude (USOIL), price action has formed a bullish weekly candle, somewhat of a hammer. The noted formation would suggest of a possible incoming reversal.



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