Oil Slumps as OPEC's Surprise Plan to Raise Output
The news on weekends is always relatively sudden. There are two main news this weekend. One is that the Houthis attacked the US aircraft carrier (twice), and the other is that the OPEC meeting was held, and the follow-up production reduction policy was determined.
First of all, the US aircraft carrier was attacked, and the US side was very "restrained", saying that it had not found the attack, but the Houthis were very active in "claiming" that they had attacked the US aircraft carrier twice. This contrast has little impact on the market in the short term, but it may affect the prestige of the US military in the Middle East in the long run, and may further reduce its influence in the Middle East.
For oil prices, it may be positive in the medium and long term. The results of the OPEC meeting have been announced, some kind of production reduction agreement with a limited increase in production has been reached. The time for routine production cuts within the OPEC organization has been extended without any suspense, but the high-profile "voluntary production cuts" policy will be gradually canceled from October 2024 to September 2025, and the UAE's crude oil production will be greatly improved.
This is particularly unfavorable for the market, which is a negative mentality if it does not increase production and reduce production. The drop in oil prices has dispelled market expectations for rising inflation to a certain extent, which in turn will affect other commodities.
1. How will it affect oil prices?
From the news point of view, it is generally negative. However, the degree of negativity does not greatly exceed expectations, so in terms of oil price trends, the overall volatility is weak, and around $70 is still an important support position.
Technically, the U.S. dollar is in a triangle pattern, which is more common in crude oil. Once a breakthrough is made, there will often be some rapid fluctuations in the market. However, the current market is at 83 on the upper track and around 70 on the lower track. As time goes by, the oil price will always approach the above price. At that time, observe whether there is a breakthrough. No matter which side of the breakthrough occurs, the market speed will be similar to that of copper or silver. Everyone pays attention.
2. Will U.S. stocks be affected by Houthi attacks?
On Friday night, the U.S. stock market experienced a major reversal in the last two hours of the close. However, there was not much news about U.S. stocks over the weekend, so it is difficult to judge whether the adjustment is over or the adjustment is on. The Houthi attacks are in a state of "cold treatment" by the US military, and I am afraid that the frequency or scale of attacks will increase, which may have an impact on US stocks at that time.
However, the current fundamental basis is not clear, and we can solve it technically. May is a month when U.S. stocks often have inflection points. Therefore, May 23 (S&P 5366 points) can be used as a watershed to measure the market trend. If there is an effective breakthrough, sell in may will be declared invalid; If the S&P fails to break through effectively for a long time, the stock index may still adjust, please remain cautious.
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