In an article published before the OPEC/N-OPEC meeting earlier this week, named “Oil in Global Economy Series: Oil might suffer ‘buy the rumor, sell the news’”, available at http://www.econotimes.com/Oil-in-Global-Economy-Series-Oil-might-suffer-buy-the-rumor-sell-the-news-717355 , we warned our readers that oil price might suffer the famous ‘buy the rumor, sell the news’ trade and that it exactly what happened yesterday. Oil price suffered more than 3 percent selloff after the OPEC and participating N-OPEC countries announced the agreement to an extension for nine months until March 2018. The pre-announcement of the scope of the deal by the oil ministers of Saudi Arabia and Russia also contributed to the fall along with other rumors of extended cuts and more countries joining the initiative. WTI is currently trading at $49.1 per barrel and Brent at $2.7 per barrel premium to WTI.

So, what now for the oil price with the OPEC speculations being over?

While an agreement to extend supply cut is a positive fundamental development for the oil market, we suspect that the price may remain subdued despite the deal. There could be some buying after yesterday’s big selloffs (we are already noticing some), however, we suspect that the price would decline further towards $46.5 per barrel (WTI) in the short term before next major move. We would be closely monitoring price movement to understand the direction.

When the oil price was trading above $49 per barrel back in April we forecasted the price to drop to as low as 443 per barrel and later extended that target to $38 per barrel mentioning the threat of deal extension as a vulnerability to the call. Despite the OPEC deal, we still do not see the strong drive that might lead price to rocket.