Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
Expand November <span class='blogcount'>(26)</span>November (26)
Expand October <span class='blogcount'>(24)</span>October (24)
Expand September <span class='blogcount'>(33)</span>September (33)
Expand August <span class='blogcount'>(26)</span>August (26)
Expand July <span class='blogcount'>(32)</span>July (32)
Collapse June <span class='blogcount'>(28)</span>June (28)
Investors on edge after Wall Street sell-off
30 Jun 2017
Central bankers keep traders guessing - Video Update
29 Jun 2017
Markets mixed ahead of weekend - AM Briefing
23 Jun 2017
Investors concerned over oil sell-off - AM Briefing
22 Jun 2017
Crude oil hits seven-month low - Video Update
21 Jun 2017
Sell-off in crude weighs on equities - AM Briefing
21 Jun 2017
Crude falls back to November lows - PM Bulletin
20 Jun 2017
Fresh records for US indices - AM Briefing
20 Jun 2017
Equity rally resumes - AM Briefing
19 Jun 2017
Markets steady ahead of weekend - AM Briefing
16 Jun 2017
FOMC surprises with “hawkish rate hike” - Video Update
15 Jun 2017
Fed unveils “hawkish rate hike” - AM Briefing
15 Jun 2017
FOMC rate decision in focus - Video Update
14 Jun 2017
Investors expect another Fed rate hike - AM Briefing
14 Jun 2017
FOMC look-ahead - PM Bulletin
13 Jun 2017
NASDAQ futures recover in early trade - AM Briefing
13 Jun 2017
Equities slide after US tech sell-off - AM Briefing
12 Jun 2017
May-hem! Tories chuck away majority - AM Briefing
09 Jun 2017
Brief notes on gold - PM Bulletin
08 Jun 2017
Markets calm as investors take “Risky Thursday” in their stride
08 Jun 2017
Markets becalmed ahead of “Risky Thursday” - AM Briefing
07 Jun 2017
Sterling, events on Thursday and the UK election
06 Jun 2017
Safe havens in demand - AM Briefing
06 Jun 2017
Trading Guides - How CFD trading works
05 Jun 2017
Sterling steady after terror attack - AM Briefing
05 Jun 2017
Non-Farm Payrolls in focus - AM briefing
02 Jun 2017
Non-Farm Payroll look-ahead - Video Update
01 Jun 2017
Crude bounces after US inventory data - AM Briefing
01 Jun 2017
Expand May <span class='blogcount'>(35)</span>May (35)
Expand April <span class='blogcount'>(31)</span>April (31)
Expand March <span class='blogcount'>(38)</span>March (38)
Expand February <span class='blogcount'>(36)</span>February (36)
Expand January <span class='blogcount'>(39)</span>January (39)
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


Crude oil took another tumble today. This latest move means that both WTI and Brent are now trading at their lowest levels since mid-November last year. This is of particular significance as the low back then preceded a key OPEC meeting just a fortnight later. This was when OPEC together with a number of significant non-OPEC producers came up with an agreement to cut output. The idea behind this was to attempt to address oversupply issues in the market which were contributing to a decline in the oil price. It’s worth remembering that crude was trading below $30 in early 2016 having fallen from over $100 eighteen months before. Despite putting in a decent recovery which took prices back above $50, crude looked vulnerable to further weakness. Oil producers were desperately raising production in an attempt to boost revenues even as prices declined. Yet global growth rates had failed to recapture pre-crisis levels and this contributed to global inventories hitting record highs.

In the months leading up to the November OPEC meeting, the prevailing wisdom was that oil producers would find it impossible to agree to any form of output freeze, let alone a cut. An attempt reach agreement to freeze production back in April 2016 ended in failure. Not only that, but experience suggested that even if all sides signed up to a deal, there would always be a few participants who cheated. However, ahead of the November OPEC meeting rumours began to swirl that participants were serious about taking measures to combat weak prices. Oil started to rally and then surged higher once the 1.8 million barrels per day output cut was announced. Things became even more encouraging early in 2017 when it became apparent that compliance amongst producers, particularly within OPEC, was very high.

Many producers were hoping to push prices back up to $60 per barrel or so. Yet crude was unable to break above the mid-$50 area. US production increased significantly over the past twelve months, helped initially by higher prices but also through new technologies and stunning efficiencies. It soon became apparent that the oil market needed something else to keep it elevated. Unfortunately, last month’s decision to extend, but not deepen, output cuts wasn’t enough. The selling momentum has built up steadily, helped in no small measure by a series of bigger-than-expected US inventory numbers.

It’s a long wait until the next OPEC meeting on 30th November. But if oil continues to fall there’s a chance they hold an emergency meeting. In the meantime, investors will have to deal with weekly updates on US inventories. If stockpiles continue to grow, then the downside pressure on oil prices should continue. But it’s worth remembering that oil is a traders’ market and it’s currently looking somewhat oversold - technically at least. It would only take a rise in geopolitical tensions or a significant inventory drawdown to see prices bounce back sharply. So watch out for the latest US inventory updates after tonight’s close and again tomorrow afternoon.

Chart courtesy of


Posted by David Morrison

Category: PM Bulletin

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.