Oil prices rise in anticipation of further OPEC cuts

Oil prices continued to rise on Tuesday, with WTI prices climbing to the $82.5 per barrel level. If the WTI price declines, it may encounter support near $75.9 per barrel, while resistance may be found near $83.4 per barrel.

Supply concerns have been keeping oil prices up. OPEC+ members recently decided that the 1 million barrels per day cut would be extended beyond July and into August. The OPEC+ Joint Ministerial Monitoring committee meeting will take place on Friday and anticipation of further production cuts has been driving oil prices up. Saudi Arabia is expected to extend the output cut of 1 million barrels per day for another month to include September, increasing supply concerns.

Deterioration in China’s economic outlook is keeping oil prices down. Uncertainty over China’s economic recovery has put a cap on oil prices. China is the world’s largest importer and a weaker Chinese oil demand outlook has put pressure on oil prices. 

There is, however, speculation that the Chinese government may announce a massive stimulus package later this month to boost its struggling economy. Expectations of Chinese stimulus have increased the oil demand outlook, boosting oil prices. Chinese officials have pledged to step up policy support for the economy, causing oil prices to spike. It has been reported, however, that China is holding off on major stimulus for now. 

The Fed’s hawkish monetary policy has reduced the oil demand outlook, putting pressure on oil prices. The U.S. Federal Reserve raised interest rates by 25 basis points last week to a target range of 5.25% to 5.50%, the highest level in 22 years. 

The Fed’s decision to resume economic tightening, however, was widely anticipated and had already been priced in by markets. Oil prices continued to rise despite the announcement of fresh rate hikes. Cooling US inflation rates have shifted Fed interest rates expectations towards a less hawkish direction. The prospect of a lower rate ceiling than previously anticipated increases the oil demand outlook, boosting oil prices.

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: