Crude oil continues to find solid buying pressure as dips keep getting bought in all conditions. We saw the lockdowns in China send the economy into a deep contraction which weighed on most risk assets, but crude Oil kept marching higher.

Prices of everything have been increasing as consumer inflation heads toward 10%, while central banks have started raising interest rates in a frenzy. This is pushing the consumer in a tight spot, and May retail sales from the UK showed that the British economy might be heading for recession, since inflation is not cooling off.

OPEC decided to exclude Russia from OPEC+ and replace its production, while Russia will still sell its Oil in China and India. September had been the planned end date for full production, so they’ll essentially be done with the deal in August now, instead of September.

There will still be some baseline numbers in place in August/September so it’s not a total free-for-all but it’s heading in that direction. More importantly, nearly all countries are under-producing quotas now so the real amount of oil added will be nowhere near the 648Kbpd touted.

OPEC Production Output

Many of these countries tout higher potential production levels (Saudi Arabia at 11.5m bpd, for instance) but they’ve never achieved that for any sustained length of time.

One school of thought in the market — and I’m sympathetic to it — is that oil can’t really take off until we see what OPEC is really capable (or not capable) of.

WTI Crude Oil H4 Chart

WTI crude oil dived from $120 to $111 lows on the last news report, but the 100 SMA (green) turned into support and crude Oil bounced off that moving average, heading for the high again. This shows that someone wants Oil to be expensive and is buying Oil aggressively.

US WTI Crude Oil Live Chart