Oil prices gained strength on Monday, with WTI price rising to the $78.0 per barrel level. If WTI price declines, it may encounter further support near $72.4 per barrel, while resistance may be found near $80.0 per barrel.
Speculation about further OPEC supply cuts boosted oil prices on Monday. The organization is meeting again next week, and it is reported that its members will decide on further production cuts to maintain oil prices above the $80 a barrel mark.
OPEC+ kept its output policy unchanged at its latest meeting, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. Russia and Saudi Arabia recently reaffirmed their commitment to maintain these voluntary supply cuts. Many market analysts even predict that the rate cuts will be extended into the first quarter of 2024. Bloomberg reported on Wednesday that Russia will cut its crude oil export duty by 5.7% for December, citing the Russian Finance Ministry. Oil prices, however, continued to decline, even on concerns of limited supply.
Oil prices have been supported by geopolitical risks. The crisis between Israel and Hamas continues, propping up oil prices. Fears that the war in Israel would disrupt oil supply are easing, however, causing oil prices to slip. The crisis seems to be contained so far and risks of the war spreading in the region abate.
Global economic concerns are dampening the oil demand outlook, putting pressure on oil prices. Oil prices are also kept in check by a strong US dollar and high-interest rates. Most major central banks, however, are hitting pause on rate hikes, boosting oil prices. FOMC members have voted to keep interest rates unchanged at a target range of 5.25% to 5.50%.
The Fed’s approach remains largely data-driven and will depend on how fast inflationary pressures may ease in the next months. After US headline inflation surprised on the downside on Tuesday, market expectations of future rate hikes went down to zero. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down.
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