Tuesday’s trading session saw major U.S. indexes move higher at the open, but fizzled out later in the day as oil prices fell as investors were wary of a deal between Saudi Arabia and Russia to cut production. The two have been locking horns in a price war, causing oil to fall unceremoniously.
U.S. President Donald Trump announced that the two nations have agreed in principle to cut production, thus lowering supply and hopefully prices in turn. However, the more time that goes on without actual negotiations taking place, the more skeptical investors are.
However, things could turn later in the week as more words turn into action.
“OPEC+ is due to hold a video conference on Thursday at 1400 GMT after U.S. President Donald Trump said last week he had brokered a deal between Riyadh and Moscow on cuts amounting to an unprecedented 10 million to 15 million BPD, or about 10% to 15% of global supplies. Nothing has yet been formalized,” a Reuters report noted. “An OPEC source told Reuters on Tuesday the size of any OPEC+ curbs depended on volumes other producers such as the United States, Canada, and Brazil were willing to cut.”
However, the U.S. hasn’t come to the table just yet with a commitment for cuts. President Trump already reasoned that the U.S. had already cut production to suitable levels.
“The United States has yet to commit to any cut, while Trump has said U.S. oil production had already fallen,” the report added further. “After the OPEC+ talks, Saudi Arabia will host a video conference on Friday for energy ministers from the Group of 20 (G20) major economies ‘to ensure energy market stability’, an internal document seen by Reuters showed.”
“U.S. antitrust laws prohibit oil producers in the United States from taking steps to push up oil prices, but output curbs would be legal if state regulators or the federal government set lower production levels, experts say,” the report said. “Other oil producers outside the OPEC+ group have already indicated a willingness to help. Canada’s Alberta province, home to the world’s third-largest oil reserves, said it was open to joining any potential global pact.”
Oil traders betting on more price increases can look to exchange-traded funds (ETFs) like the United States 3x Oil (NYSEArca: USOU) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (NYSEArca: GUSH).
For more market trends, visit ETF Trends.