The recent OPEC+ meeting held over the weekend had minimal impact on the price of crude oil, with WTI oil opening at $76.72 per barrel on Monday, only slightly higher than the closing price of $76.57 on Friday. This indicates a lack of clear direction resulting from the decisions made by oil producers. On one hand, there is a bullish argument for the market, suggesting that production cuts will continue to support the price of oil. Reuters reported that OPEC+ members agreed to extend production cuts of 3.66 million barrels per day until the end of 2025. However, on the other hand, there is a bearish argument, as eight OPEC+ countries have signaled their intentions to gradually phase out voluntary cuts of 2.2 million barrels per day from October 2024 to September 2025.
Goldman Sachs analysts interpreted the results of the meeting as more bearish for the market. They highlighted a strong desire among certain members of OPEC+ to increase production due to high spare capacity. The bearish sentiment is further reflected in the technical analysis of the WTI crude oil chart. The chart indicates a break in the upward trend, as seen from the blue channel, which was previously mentioned in a review from May 10.
The recent price action in the oil market suggests a shift in momentum. Bulls attempted to push the price above the psychological level of $80 per barrel on May 29, but this move turned out to be a false breakout. Subsequently, bears took control and pushed the price below the lower boundary of the previous upward channel, creating a new downward channel (shown in red) since April. Technical analysis of the oil chart reveals that the price is currently near the median line of the red channel, signaling a temporary balance between supply and demand.
Below the current price of WTI crude oil, an important support level lies at $75.75, which had previously acted as a significant level of support. If bulls attempt to rally and push the price higher, the upper boundary of the downward channel may act as resistance. However, if geopolitical tensions in the Middle East remain stable, bears could continue to exert pressure, aiming to break below the $75.75 level. This scenario could potentially slow inflation and benefit the current U.S. administration leading up to the upcoming presidential elections.
The OPEC+ meeting outcomes have left the crude oil market in a state of uncertainty. The conflicting views among OPEC+ members and the technical indicators on the oil chart suggest a potential shift towards a bearish sentiment. Traders and investors need to carefully monitor the market dynamics and geopolitical events to gauge the future direction of crude oil prices. It is essential to stay informed and adapt to changing market conditions to make well-informed trading decisions.