After WTI oil prices failed to stay above $81.00 in the Asian market, there was some consolidation. Oil prices gapped sharply above $81.00, up 7% from Friday's close, spurred by OPEC+'s announcement of further production cuts this weekend.
According to Reuters, Saudi Arabia, OPEC's largest oil producer, said it would cut production by 500,000 barrels per day. The oil cartel led by Saudi Arabia unexpectedly announced production cuts of about 1.16 million barrels per day over the weekend, which would bring the overall production reduction pledge to 3.66 million barrels per day. The Saudi Energy Ministry said the voluntary cuts were a precautionary measure aimed at supporting the stability of the oil market.
In October, OPEC+ agreed to cut output by 2 million bpd from November until the end of the year, a move that angered Washington as tight supplies boosted prices. The U.S. argues that the world needs lower oil prices to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund the war in Ukraine.
Russian Deputy Prime Minister Novak also said on Sunday that Moscow would voluntarily cut production by 500,000 barrels per day until the end of 2023. Moscow unilaterally announced the cuts in February, after Western countries imposed caps on oil prices.
U.S. officials said Russia's alliance with other OPEC members was weakening after Russia unilaterally cut output, but Sunday's move suggested cooperation remained strong.
Following the above news, the US National Security Council said. "Given the uncertainty in market factors, we do not think it is advisable to cut production at this time, and we have made that clear."
The U.S. is not welcoming to the OPEC+ policy, so the potential release of more strategic petroleum reserves suggests a pullback in oil prices.
After OPEC+ unexpectedly announced on Sunday that it would further cut production, Goldman Sachs hastily raised its forecast for Brent crude futures this year and next.
Goldman Sachs believes that compared with the past, OPEC+ has very large pricing power in the crude oil market, and this unexpected production cut is in line with their new principle of preemptive strikes, because they can take action without significant loss of market share.
In addition to OPEC + production cuts, the weak dollar and the overall risk appetite in the market have also kept WTI crude oil prices firm. The U.S. dollar index (DXY) has maintained its downward trend for the past three weeks, while riskier assets held firm as fears of a banking crisis subsided and bets on a hawkish Federal Reserve policy resumed. Rising oil prices are expected to fuel inflationary pressures globally. That could force the Federal Reserve to continue its policy tightening mantra even further.
Next, the U.S. non-agricultural employment data (NFP) for March and the ISM Purchasing Managers Index for the month will be important data worthy of attention.
WTI Oil Price Technical Analysis
The daily chart shows that after facing the horizontal resistance near the high point of $81.00 on March 7, oil prices showed a firm gapping trend, and there has been a long liquidation.
The 10-period exponential moving average, which maintains an upside bias, is at $74.20, indicating a very solid upside momentum.
The RSI (14) climbed above 60.00 for the first time in the past three months, with no divergence and overbought signals.
If oil prices break above the April 3 high near $81.60, the bulls will lift prices closer to the Dec. 1 high of $83.30 and then the Oct. 21 high of $85.66.
In addition, if WTI oil prices fall below the March 31 low of $73.31, it will push WTI oil prices closer to the March 23 high of $71.69.
If WTI oil prices fall below this level, it will further pressure oil prices near the March 27 low of $69.18.
WTI oil price daily chart
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