Oil Price Susceptible To Rise In US Output Following OPEC JMMC Meeting

The price of oil attempts to push back above the 50-Day SMA ($59.88) after trading below the moving average for the first time since November and crude may continue to consolidate following the OPEC Joint Ministerial Monitoring Committee (JMMC) meeting as the update to the production adjustments table reveals plans to slowly unwind the production cuts in response to COVID-19.

Image of OPEC production table

Source: OPEC

It seems as though OPEC and its allies are in no rush to switch gears as the group pledges “to assess market conditions and decide on production level adjustments for the following month, with every adjustment being no more than 0.5 mb/d,” and it seems as though OPEC+ will continue to regulate the energy market in 2021 as “the volatility observed in recent weeks warrants a continued cautious and vigilant approach in monitoring market developments.”

In turn, the ongoing efforts by OPEC and its allies may keep the price of oil afloat as the most recent Monthly Oil Market Report (MOMR)insists that “in 2021, world oil demand is forecast to increase by 5.9 mb/d, reflecting the positive economic impact on oil demand during 2H21,” but the recovery in US production may drag on crude prices as output increases for the second consecutive week.

Image of EIA Weekly US Field Production of Crude Oil

Recent figures from the Energy Information Administration (EIA) showed weekly field production widening to 11,100K from 11,000K in the week ending March 19, and a further rise in US crude output may drag on the price of oil ahead of the next OPEC JMMC meeting on April 28 with the group on track to gradually reverse the production cuts in response to COVID-19.

With that said, the decline from the yearly high ($67.98) may turn out to be change in market behavior rather than a near-term correction as the price of oil snaps the upward trend carried over from last year, and recent developments in the Relative Strength Index (RSI) highlight a similar dynamic as the oscillator tracks the downward trend established in March.

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