OPEC+ Production Gains Wiped Out Ahead of Pivotal Week for Oil Prices

Crude Oil Prices, Charts and Analysis:

WTI Technical Outlook: Mixed

WTI WEEK’s Review and World Bank Forecasts

Crude oil had a mixed week to say the least, as the rally to close the week was not enough to prevent a 1.5% decline while posting its sixth straight month of losses. Early gains of the week faded as the US dollar recovered in the middle of the week before strong US earnings data saw optimism return to the market.

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US data itself painted a somewhat mixed picture on its own, with US GDP data and a drop in spending on US capital goods pointing to slowing economic growth while fears of inflation and recession resurfaced. This came back to the fore with PCE data on Friday coming in slightly up m/m m/m and y/y indicating another increase in prices or at least the need to maintain restrictive rates for a longer period which could in turn affect demand.

US inventories data from the Energy Information Administration fell more than expected last week while demand for motor fuels rose as summer approaches. Meanwhile, US production fell by about 12.5 million barrels per day in February, the lowest level since December 2022. Meanwhile, Baker Hughes’ report for the week ending April 28 was unchanged at 591 rigs, but it fell by one in April in the fifth monthly decline. she has. .

source: oil and gas

It was also important for the World Bank to release its latest Commodity Markets Outlook report for 2023 and beyond. The report indicates that commodity prices are poised for their biggest drop since the Covid-19 pandemic. Energy prices are expected to fall 26% this year with Brent crude oil price in US dollars expected to average $84 per barrel this year, down 16% from the 2022 average. Despite the large declines expected for this year, prices for all commodity groups will remain well above their 2015-2019 average, with European natural gas prices hovering at nearly three times the average over 2015-2019.

I look forward

Heading into the new week, we have a set of high risk events that could have an impact on the US dollar and general market sentiment which in turn could affect oil prices. Ongoing concerns about a potential recession could either be on hold or worsen following the outcome of the FOMC meeting on Wednesday. Markets are anticipating a 25bps rally but the flaw is in the details they say with market participants keen to hear the Federal Reserve on the rate path forward as well as the lingering fears surrounding a recession. A hike by the Fed and fellow central banks next week could fuel the current recessionary notion and affect any further recovery in oil prices.

There is quite a bit of data on the economic calendar for the week, but nothing directly related to OPEC+ or oil prices. Most of the moves will be due to the impact of data releases which have general sentiment and the US dollar, something that seems to have become a topic lately. In short, hawkish rhetoric from central banks and in particular the Federal Reserve is likely to see recession fears rise and oil prices fall and vice versa.

Economic calendar for the next week

The coming week on the calendar is jammed across the developed world with a mix of “high” rated data releases and “medium” rated data releases.

Here are some of the major high-risk events that are “rated” for the coming week in the economic calendar:

• On Monday, May 1, we have US ISM data at 14:00 GMT.
• On Tuesday, May 2nd, we have the Eurozone’s year-over-year core inflation report at 09:00 GMT.
• On Wednesday, May 3, we have US ISM Services data at 14:00 GMT.
• On Wednesday, May 3rd, we have the FOMC rate decision and press conference scheduled for 18:00 and 18:30 GMT respectively.
• On Thursday, May 4th, we have the ECB rate decision and press conference starting at 12:15 and 12:45 GMT respectively.
• We conclude on Friday, May 5, the week with the US NFP jobs data at 12:30 GMT.

For all the economic data and events that move the market, see DailyFX calendar

artistic look

West Texas Intermediate Crude Weekly Chart – April 28, 2023

Source: TradingView

The weekly chart for WTI is showing a large wick to the downside from last week as buying pressures came to the fore on Thursday and Friday. The weekly candle closed as the Hanging Man candle; However, it is not exactly the top of the recent rally and therefore looks less convincing. On the weekly chart, it appears that we are in a very wide trading range since November 2022, trapped between the 100 and 200 day moving averages. Oil hasn’t seen 3 consecutive bearish weeks since November 2022 and this is likely to continue based on price action and the close of the last weekly candle.

West Texas Intermediate Crude Daily chart – April 28, 2023

Source: TradingView

The daily time frame gives us a clearer picture of the initial jump in prices after the announcement of production cuts by OPEC+ at the beginning of April. We saw prices rally slightly before finding significant resistance at the 200-day moving average around $83.30 a barrel before falling to this week’s low of $74 a barrel.

The price is currently below the 100-day moving average after rising strongly on Thursday and Friday. Friday’s closing candle completed the Morningstar candlestick pattern which indicates more bullishness to start the new week. But whether this is sustainable will depend on economic data as well as geopolitical tensions.

Key levels to watch out for

resistance levels:

• $78.70
• $79.80
• $81.90 (200-day moving average)

Key support levels:

Written by: Zain Fouda, market writer for DailyFX.com

Connect with Zain and follow her on Twitter: @employee