Crude Oil Prices Linger Ahead of Production Guidance

Brent Crude Oil Analysis and Talking Points

• Russia is finding it difficult to cut production, while the rest of the OPEC+ members are seeking higher prices.
• The upcoming light economic week gives more focus on OPEC+.
• The weekly chart for Brent Crude Oil may indicate an increase in prices.

Brent crude oil back base

As for crude oil prices (WTI and Brent), the OPEC+ meeting on June 4, 2023 will be a critical juncture for the oil markets. Recently, friction between two of the most influential states within the cartel, Russia and Saudi Arabia; was growing. The problem stems from OPEC+ pledging to limit supplies while Russia continues to flood the market with cheap Russian oil. In short, Russia has been contradicting Saudi Arabia’s efforts to raise the price of crude oil.

From a Russian perspective, the demand for its oil by major countries like India maintains cash flow holding back Russia in an environment where international sanctions have left Russia no choice but to extend this important economic lifeline.

Another worrying sign for OPEC+ is the lack of optimism about the Chinese economy with the manufacturing PMI released by NBS last week remaining in contraction territory hitting a yearly low of 48.8. If this trend continues, OPEC+ is likely to make further production cuts in future meetings. The uncertainty surrounding the day leads to an increased sense of anticipation. Many expect another cut but OPEC+ may use this meeting to signal to the markets that they have the ability to disrupt the supply/demand dynamics if they need to but take a wait-and-see approach. This may be the most likely scenario given that the recent rally in the US dollar could fade after the dovish Fed talk combined with rising unemployment and clarity about the US debt ceiling. Although the recent headline NFP number beat estimates, the decline in average earnings may help support crude oil prices as upward pressure in inflation may ease.

The economic calendar (see below) is rather subdued this week with the exception of the OPEC+ meeting but both the API and EIA Weekly Crude Oil Inventories Change figures will be in focus as the latter figures showed a growing Crude Oil Inventories build.

US Economic Calendar (GMT +02:00)

source: DailyFX Economic Calendar

Technical Analysis

Brent Crude Oil Price Chart (Weekly)

Chart created by Warren VenkitasI.G

The weekly Brent crude price action shows a rejection of the 200-day moving average (marked in blue) as the last candle formed a long wick lower. Traditionally, this indicates an imminent upside but will ultimately be determined by OPEC+ guidance.

Brent crude oil price chart (daily)

Chart created by Warren VenkitasI.G

The above short-term daily chart reflects the indecision in the oil markets as the Relative Strength Index (RSI) is hovering around the midpoint level indicating that the markets are not in favor of either bullish or bearish momentum.

Key resistance levels:

• 80.00
• 50 day moving average (yellow)
• 77.23

Key support levels:

IG customer’s sense: mixed

IGCS shows that retailers are long net On crude oil, with 81% of traders who are currently holding long positions (as of this writing). At DailyFX, we usually take a view contrarian to crowd sentiment, however, due to the recent changes in long and short positions, we come to a cautious short-term disposition.

Contact and follow up@employee