WTI Crude Oil Falls to Four-Month Low on OPEC+ Production Cut Signal; Buy Above $77?

Oil prices recently fell to a four-month low, extending losses after OPEC+ signaled plans to reduce production cuts.

In a weekend meeting, OPEC+ decided to maintain 3.6 million barrels per day of cuts until the year’s end. However, the cartel will start scaling back 2.2 million barrels per day from September 2024 to October 2025. This move was perceived as bearish, suggesting limited capacity for OPEC+ to support prices further.

Weak Economic Indicators Raise Demand Concerns

Weak economic data has also contributed to the decline in oil prices. The U.S. purchasing managers index showed manufacturing activity contracted for the second consecutive month in May, raising fears of reduced demand in the world’s largest fuel consumer.

This reading indicated that persistent inflation and high interest rates might be hampering economic activity, thus weakening demand for oil.

Additionally, market focus is on upcoming key labor market readings from the U.S., which could influence the outlook for interest rates, with a potential September rate cut by the Federal Reserve under consideration.

Mixed PMI readings from China, the top oil importer, further added to market jitters, showing an unexpected contraction in its manufacturing sector. This has raised concerns about the strength of demand from China, which significantly impacts global oil markets.

Geopolitical Developments and Market Sentiment

Furthermore, oil traders are factoring in potential geopolitical stability. The U.S. is attempting to broker a ceasefire between Israel and Hamas, which could lead to more stable conditions in the Middle East.

A ceasefire would reduce the geopolitical risk premium on oil, contributing to lower prices.

WTI Crude Oil Price Forecast: Technical Outlook

WTI Crude Oil (USOIL) is trading at $77.12, showing a slight decline of 0.02%. The pivot point at $77.41 is a crucial support level. Immediate resistance levels are $78.30, $79.55, and $80.55.

Support levels are $76.14, $75.06, and $73.92. The Relative Strength Index (RSI) is at 32.78, indicating oversold conditions. The 50-day Exponential Moving Average (EMA) is at $78.30, acting as resistance.

An upward trendline supports USOIL near $77.10. Closing above this level may drive a buying trend towards the $78.60 EMA level. Conversely, a fall below $77.10 could signal further declines.

ABOUT THE AUTHOR See More

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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