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Research Analyst

The price of Oil will remain volatile until OPEC can agree on output

There are several fundamental pressures causing volatility in the price of Oil and the price of related equities. The price of WTI, Brent, Heating Oil and stocks in Oil and Gas companies are worth keeping an eye on over the coming weeks. For traders, CFD or otherwise, the volatility is a time of many opportunities.

One day the price of a barrel of Crude Oil is up 2.2%; the next, it is down 4.2%, like that which occurred with WTI from Monday to Wednesday last week. The price movements are dependent on the news of the day and the associated media coverage, and the mood of investors and thier tolerance for uncertainty.

The price of Oil instruments illustrated

oil instruments

Fundamental pressures:

OPEC+ meetings affecting the price of Oil

For two weeks, OPEC+ members have failed to agree on the production output for the second half of 2021 and the following year.

The disharmony among the OPEC+ members has, naturally, resulted in volatility in the Oil market. At one point, as OPEC+ concluded a Thursday meeting without reaching an agreement to increase production output, the per barrel price of WTI and Brent Oil traded at more than US$75. 

The OPEC+ stalemate has affected the price of Oil both positively and negatively. As tensions continued among OPEC+ members and meetings were cancelled in frustration, the price of Oil began moving the opposite way. Evidently, Oil traders lost patience in the face of continued uncertainty. Between Wednesday and Thursday last week, Oil fell to 2-week lows, losing 1.8%. 

As it stands, no deal to boost output has been achieved by OPEC+, and meetings have been put on hold. 

Open for business?

Part of the reason that OPEC+ is having trouble forming a consensus is because predicting Oil demand is currently an extra complicated exercise. 

Overall, demand for Oil is expected to lift in the latter half of 2021, but by how much is a more difficult question. Further complicating the issue is how significant economies around the world are reacting differently to the new Delta Covid-Variant. Each nation is weighing factors such as its vaccination rates and its people's lockdown exhaustion.

The Delta variant has had little trouble spreading across the world from its origin in India. Some countries are planning on treating it as a mild inconvenience. For example, the UK intends to live with the virus as best they can while shelving lockdown measures. Other countries are implementing or extending lockdown orders to limit the variant's spread. Australia and Japan are in this group of nations. Japan has now banned spectators from attending its Tokyo Olympics games (yet not cancelling the games altogether). While the former is discussing the possibility of extending the lockdown in its largest city, Sydney, once again.

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