Oil bulls were exuberant yesterday when the price of West Texas Intermediate (WTI) crude surged over 4% to its highest level of the month. They’re understandably less enthused that prices are falling 4% to completely unwind yesterday’s gains and leave the benchmark trading roughly in the middle of the monthly range at $93.00 as we go to press.
Part of yesterday’s gain was driven by fears of supply disruptions on headlines of violent clashes in Iraq, but today’s news that the conflicts are primarily in Baghdad, far from the main oil hub of Basra, have reduced those concerns for the moment. While the political situation in Iraq remains tenuous, the country’s most important export continues to flow.
More generally, oil traders are looking ahead to next week’s OPEC+ meeting after Saudi Arabia warned that the group could look to reduce production especially as Iranian oil starts to hit the market. With most producers already operating at or above capacity and growing signs that the global economy may be slowing, some reduction of supply is looking increasingly likely in the coming months.
Technical view: WTI Crude Oil (US OIL)
Looking at the daily chart of WTI over the last year, prices found support at the October/November 2021 highs in the $85.00 area a couple weeks back, bouncing to break out of their 10-week bearish channel. Now, the commodity is finding resistance at the confluence of its 50- and 100-day EMA in the $97.00-$98.00 area.
Between end-of-month flows and Friday’s highly-anticipated NFP report, we wouldn’t be surprised to see prices consolidate near current levels for the next couple days. Looking out toward next week, more explicit comments from OPEC+ leaders on reducing supply could push oil prices back toward psychological resistance at $100.00, whereas a lack of fresh comments on that front could drive WTI back below $90.00.
Source: TradingView, StoneX