OPEC+ Supply Cuts Exceeds USD’s Strength: The Fed Shows No Signs of a Pivot

Crude Oil

The OPEC+ meeting in Vienna yesterday’s outcome saw the organization announcing a supply cut of 2MMbbls/d to kick start in November 2022 and conclude at the end of 2023, which is said to be subject to change as circumstances necessitates. Brent crude oil rallied on the back of this announcement, with pre-meeting rumors pointing to some form of reduction in supply between 1MMbls/d – 2MMbls/d.

This year has seen OPEC+ nations producing far less than their projected supply amounts this year meaning, so this supply cut was necessary and might not even affect the already low production of some countries. However, major suppliers like Saudi Arabia will require production cuts.

Brent crude might remain above the $90 handle if OPEC+ sticks to its decision. The U.S. has been trying to persuade OPEC+ to avoid another cut that could heighten tensions between the two major oil producing regions.

The U.S. nuclear deal with Iran is more important to the U.S. as a positive outcome could bring back Iran’s supply, thus curtailing crude oil prices.

The potential EU ban on Russian oil and price cap might upset the recent dynamics, so it will be important to monitor updates in this regard. From a demand side, global recessionary fears have not dissipated, which may give crude oil bears some fundamental support going forward.

The U.S. Dollar rebounded this morning after Fed officials (Daly and Bostic) maintained their hawkish outlook from yesterday, quelling ‘Fed pivot’ bets.

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