Yesterday, the energy ministers of the 14 countries that make up the OPEC+ group - member states and allies such as Russia, gathered in Vienna for another two-day conference to decide and coordinate their future plans of oil production.
As multiple analyses over the last few weeks have pointed out, the oil market is still off-balance. Though OPEC has been keeping production levels lower than usual for several years now, increasing production from the United States (and to some extent Norway and Venezuela), paired with lower global demand for oil, has kept prices stubbornly around or below $65 per barrel.
Because the United States and China still have not resolved their trade conflict, and the US has recently also been eyeing the European Union as a potential target for more tariffs, 2020 will likely be a difficult year for oil as well. With this in mind, investors expected that OPEC members will agree to continue limiting their oil output.
Somewhat surprisingly, OPEC decided to take things one step further and lower oil production by an additional 500,000 barrels per day until the end of March 2020, when the current agreement expires.
This is a deeper cut than anticipated and it might allow oil to strengthen a little in the short term. However, today OPEC+ needs to actually ratify this decision to make it official. Moreover, oil failed to receive a more significant boost right now as the oil-exporting countries did not discuss prolonging the agreement after March.
