Oil refinery in Saudi Arabia. Image source: sedmak © 123RF.com
The top-tier economic event of this week is undoubtedly going to be the highly anticipated videoconference of OPEC+ and its member-states.
Both Russia and Saudi Arabia, which started the crude oil price war several weeks ago, participate in the organisation, which is why investors hope that the videoconference would give the two sides a chance to reconcile and bring an end to the diplomatic impasse.
The prolonged dispute over crude oil production has distorted the global energy market, which is currently reeling from oversupply and weak demand as the coronavirus pandemic continues to impede the global economic activity.
The key point of discussion is going to be mitigating the massive glut in which the oil market has found itself since Russia and Saudi Arabia started increasing their production outputs. Donald Trump has claimed responsibility for bringing Riyadh and Moscow back on the negotiations table.
The meeting was originally planned to take place today, but according to people familiar with the matter, the concerned parties needed more time to iron out some crucial points of contention before they can start the real discussions of implementing production cuts.
The eventual outcome of Thursday’s meeting remains quite uncertain as the rift between Vladimir Putin and Mohammad Bin Salman’s Kingdom is fuelled by attempts at shifting the blame for the price war back and forth.
Both sides have expressed desires to stabilise the reeling energy market, albeit not necessarily through production cuts, but neither seems preoccupied solely with that goal in mind.
Potentially, the blame game that Russia and Saudi Arabia play with each other could escalate and impede Thursday’s talks of oil production cuts. If the diplomatic rift between Moscow and Riyadh expands on Thursday, this is going to shock the energy market and cause the price of crude to fall, thereby wiping out last week’s rally.
If, however, the conference goes well and the two sides manage to reach at least a preliminary agreement to cut production and subsequently reduce the global oil supply, this is going to support the recent hike.
The price of the precious commodity could then continue advancing on investors’ optimism and traders’ speculation.
The market opened with a 7.70 per cent gap today on the news of the conference's postponement for Thursday and the ongoing tensions between the world's two biggest exporters of crude oil.
Oil is currently consolidating between the minor support level at 25.85 and the historic resistance at 29.00.
Crude Oil 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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