Oil turns green as traders reassess historic OPEC+ output cut deal

• Oil prices are cheering the OPEC+ output cut deal. 
• Major producers have agreed to cut output by 9.7 million barrels per day. 
• The deal marks an end of the Saudi-Russia oil price war.

Oil benchmarks on both sides of the Atlantic are gaining altitude, possibly in a delayed reaction to the decision by the world’s top producers to agree to a historic output cut deal to help rebalance the market.

At press time, West Texas Intermediate (WTI) oil is trading at $24.20 per barrel, representing a 7% gain on the day. Meanwhile, a barrel of Brent is changing hands at $32.84, up 3.2% on the day.

After four-days of video conferences, the OPEC+, a loose organization of 24 oil-producing nations led by Saudi Arabia and Russia, agreed to cut the output by 9.7 million barrels per day – the largest output cut on the record.

The deal marked an end of the Saudi-Arabia oil price war that threatened the US shale industry and weighed heavily over the prices over the past couple of weeks. Some observers are of the opinion that the latest truce would help put a floor under prices.  “Now we can expect that oil prices will stay in the range from $30 to $40 US,” Leonid Fedun, Russian giant Lukoil’s Vice President, said in an interview with RBC.

However, it remains to be seen if the latest output cut agreement is enough to counter the massive demand destruction brought on by the coronavirus outbreak across the world.

Moreover, the exact extent of the economic damage and the demand destruction is still not clear, as most nations, including India, the world’s growth engine, remains in lockdown.

Both WTI and Brent had come under pressure in early Asia, with the former falling as low as $22, possibly tracking the risk-off sentiment signaled by the decline in the US stock futures. The S&P 500 futures opened the week on a negative note and fell by 2.5%. As of writing, the futures are down 1.67%.

WTI Technical levels