WTI jumped up from $46.55 to $47.40 before backing off to $47.10 now
The proposal is for a 1.5 mil bpd worth of output cuts, which is on the higher end of expectations since the market has been fed with headlines of around 1 mil bpd to 1.2 mil bpd worth of output cuts over the past few days.
However, this is all still conditional on Russia's support as the bloc will still be meeting with their Russian counterparts tomorrow to finalise any formal decision.
My guess is that Russia ends up caving in - as they always do - but they may not necessarily live up to the billing and deliver on their end of the bargain to cut production.
Either way, the market should lap up the news and this little jolt higher is a bit of an indication of what to expect. The cuts this time around could likely produce a short squeeze higher in oil after the monstrous run to the downside amid fears of the virus outbreak:
A move back towards $50 could be on the cards in such an event but I would be skeptical of a further rally anywhere above that in case of short covering.
The fact remains that the global economy is still going to slow down further as the virus continues to be more widespread across the world. Until that situation changes, oil will still find it difficult to sustain any meaningful rally well above $50 in my view.
Add to the fact the US production continues to ramp higher, supply issues will continue to plague the market as demand stutters amid the economic fallout from the virus outbreak.
This would end up being a rally that is just begging to be sold - if there even is one.
