Just a week ago, Saudi Arabia surprised the oil markets with the announcement of production cuts. At that time, the general perception was that this move would push the oil prices higher.
But in a surprising turn of events, Crude prices dropped 4% during Monday's trading session. This sudden drop also caused the WTI to reach a trading price of $65/barrel along with the Brent to $70/barrel.
According to Saudia's perspective, the price of Brent must be $80 at the minimum, but the actual value is still $10 lower! This surprise drop comes despite the announcement to reduce the daily production by 2.5 million barrels.
Last week, all the members of OPEC+, along with Saudi Arabia, reiterated their commitment to stick with the proposed production cuts. But it appears that the markets have a totally different view than the Kingdom of Saudi Arabia!
From $99 To $70 Per Barrel
It appears that Brent Crude oil is in a bearish move as it moved from $99 per barrel to only $70 during the last 7 months. On the other hand, the highest value of WTI was $94 against a low of $64 as well.
Goldman Sachs, which is one of the biggest oil bulls on Wall Street, also lowered its forecast for Brent Crude Oil. According to them, the value of the December average is $86, while the previous forecast was $95. Similarly, the forecast for the WTI has been revised from $89 to only $81 per barrel.
On the technical front, the charts also show that a bigger drop in oil markets is highly likely. The 100 SMA is located at $59.60 on the WTI chart, and that's what appears to be the target of the bears.
According to experts, these moves in the oil market tell us that Saudi Arabia doesn't have as much leverage as it initially thought. After all, the oil market is only receiving negative surprises rather than positive ones!