Crude oil tumbled on Thursday even after OPEC and its allies extended their agreement to lower production by nine months.

The Organization of Petroleum Exporting Countries extended the deal that started in January to address the global supply glut that has subdued prices. Non-OPEC producers including Russia also agreed to cut production through March, said Bijan Namdar Zanganeh, Iran’s minister of petroleum, according to Bloomberg. The deal was extended by 9 months and participants will remove from the market 1.8 mln barrels per day . While the cartel has also discussed a longer cut, a 9 months option was seen as the best among others.

Al-Falih, Saudi Arabia oil minister shed more light on what may happen in the future and how the output cut could impact the martket:

  • Extension through March 2018 will drive oil inventories back down to 5-year avg by end of 2017, and will avoid build-up in 1Q 2018
  • Various options being considered to make cooperation with non-OPEC nations a more permanent structure
  • Cohesion couldnt have been stronger between OPEC and non-OPEC
  • Non-OPEC nations will join OPEC’s next meeting on Nov. 30
  • Equatorial Guinea is joining OPEC
  • Had hoped Turkmenistan and Egypt would join pact to limit supply

The extension had been widely expected.WTI, the US benchmark of prices, rallied about 17% from its year-to-date trough at the beginning of May through Wednesday. But on Thursday, in what appeared to be an enactment of the markets parlance “buy the rumor, sell the news,” WTI tumbled more than 3.5% and back below 50 per barrel to even below 49.00. 

To conclude: OPEC delivered, but didn’t overdeliver. The move is in line with what the market had expected. Such expectations led to a 17% rally earlier this month, but as the cartel decided to roll-over its agreement, the commodity fell. That’s because a rise in shale production remains a threat and each week brings a higher production in the United States. With OPEC only extending its agreement, a supply glut may remain for longer. That is why oil could be under pressure in upcoming weeks, especially if stockpiles start to rise again.

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 Oil WTI has broken below the upward trendline in the aftermath of the OPEC’s decision. What’s more, it has also broken below 50.00 with a huge momentum, which could be a crucial breakout. That is why a move towards 47.00 could be on the cards in upcoming weeks.