Crude Oil Price Outlook Remains Chained to OPEC+ Output Uncertainty
Crude Oil, OPEC+, DOE, Technical Analysis - Talking Points:
- Crude oil prices remained depressed despite market mood improvement
- Uncertainty over OPEC+ production is weighing against the commodity
- WTI closed under the 20-day SMA, exposing potential trendline from 2020
Crude oil prices aimed lower over the past 24 hours, extending a top that started on July 6th after WTI touched its highest since the peak of 2018. This follows an ongoing dispute between OPEC+ members about the state of easing supply curbs in August. As such, there may be some doubt being priced into markets over whether or not the cartel can cooperate and coordinate in the future.
The decline in crude oil prices also closely tracked weakness in global stock markets heading into the FOMC meeting minutes. While the document showed and reiterated that policymakers could see two rate hikes by the end of 2023, the pace of assets purchases could continue as is for the time being. That likely boosted market sentiment, pushing up the S&P 500.
However, growth-linked oil prices remained depressed which was very telling. WTI could remain in such a downward-oriented state until further progress from OPEC+ members is seen, specifically between Saudi Arabia and the United Arab Emirates. As such, crude oil may struggle to capitalize on the upbeat tone set by Asia-Pacific markets heading into European and North American trade.
Eyes are also on upcoming Department of Energy (DoE) weekly inventory data. Preliminary estimates from the American Petroleum Institute (API) hinted at a roughly 8 million barrel draw in the previous week. Such a decline in inventories could offer some relief for oil prices if there continues to be uncertainty about OPEC+ output.
Crude Oil Technical Analysis
From a technical standpoint, WTI closed under the near-term 20-day Simple Moving Average (SMA). That has exposed potential rising support from November. The latter could reinstate the dominant focus to the upside in the event of further losses from here. Otherwise, key resistance stands as the 2018 high at 76.88.
WTI 4-Hour Chart
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.