Oil jumps to 7 year high as OPEC+ sticks to output plan

Oil trades at highest level since 2014 post OPEC+ meeting

Oil prices are bounding higher after OPEC+ agreed to stick with the current 400k barrel per day increase to production from November, as agreed in July.

Heading into the meeting there had been rising expectations that the oil cartel could look to raise production by a further 400k barrel per day amid growing pressure from the likes of the US and India for cheaper oil, particularly given the spreading energy crunch and rising inflationary pressures.

Oil prices have surged higher across the year as demand from economies reopening out-stripped supply and has remained elevated since. Demand is expected to continue out-stripping supply by around 1.5 million barrels per day for the next six months according to Citigroup.

In addition to reopening demand, surging natural gas prices are also under pinning oil demand. Amid the ongoing energy crunch in Asia and Europe oil is comparatively cheap next to gas now, which is prompting expectations of a large scale switch in energy supply to petroleum based fuels.

Meanwhile supply shocks have also supported the price of oil, after oil producers have struggled to get full production back online following hurricanes and tropical storms in the Gulf of Mexico. Furthermore, some OPEC countries such as Angola and Cambodia have struggled to ramp up output to the increased OPEC quota due to a lack of investment or maintenance issues.

The jump in oil prices will do little to ease concerns over persistently high inflation. Rising energy costs could quickly filter through economies lifting prices resulting in elevated inflation becoming entrenched. This comes at a time when growth is also showing signs of slowing, prompting stagflation fears.

Learn more about trading oil

Where next for WTI crude oil?

WTI crude oil trades within an ascending channel since late August. The price has broken above the previous high of 76.64 reaching 78.24. The RSI has tipped into overbought territory, so there could be some consolidation sat these levels of even a pull back. Bulls will be aiming for $80.00 the key psychological level and the upper band of the rising channel. On the flip side, support can be seen at 76.64 the previous high ahead of 74.10 the high 30 July and the lower band of the rising channel.

How to trade with City Index

Follow these easy steps to start trading with City Index today:

Open a City Index account, or log-in if you’re already a customer.
Search for the market you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels
Place the trade.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.