Crude Oil Price Talking Points
the oil price trades at a new weekly high ($115.40) amid an unexpected drawdown in US inventories, and crude oil may continue to pull back from the yearly high ($130.50) if the Organization of the Petroleum Exporting Countries (OPEC) Meet the current production schedule in the next Ministerial Meeting on March 31.
Crude oil price outlook depends on OPEC meeting
the oil price appears to have reversed ahead of the 50-day SMA ($95.32) as it extends the series of higher highs and higher lows that have built up since last week, and current market conditions may keep crude oil prices afloat, as data out of the US points to strong demand.
US reserves fell by 2.508 million in the week ending March 18 against forecasts for a rise of 0.114 million, and the development largely aligns with the optimistic outlook implied by the latest report. of OPEC. Oil Market Monthly Report (MOMR) as the update insists that “For the time being, global oil demand growth in 2022 remains unchanged at 4.2 mb/d, given the high uncertainty and extremely fluid developments in recent weeks.”
Signs of robust demand may encourage OPEC and its allies to maintain the current production schedule with the group on track to “adjust total monthly production upwards by 0.4 mb/d for the month of April 2022,” and the decline from the yearly high ($130.50) may turn into a correction in the broader trend as US production remains subdued.
A deeper look at the Energy Information Administration (EIA) update shows that weekly field production was flat for seven consecutive weeks, with a figure printed at 11,600K in the week ending March 18, and more of the same from OPEC+ may ultimately lead to higher oil prices as the group maintains a gradual approach to restoring output to pre-pandemic levels.
That said, the price of oil may continue to make a series of higher highs and lower lows ahead of the OPEC meeting, as signs of stronger demand are met by signs of limited supply, and crude may represent another attempt to try the record ($147.27) if the group shows little interest in responding to the Russia-Ukraine war.
Crude oil price daily chart
Source: business view
- Note that the price of oil broke through the August 2008 high ($128.60) and jumped to a new yearly high ($130.50) earlier this month, with the recent recovery driving the Relative Strength Index (RSI) in overbought territory for the fourth time in 2022.
- However, a textbook RSI sell signal emerged as the price of oil reversed before the all-time high ($147.27), with crude breaking out of the March opening range as it ran into the $93.50 region (retracement). of 61.8%).
- However, the drop from the yearly high ($130.50) may turn into a correction in the broader trend as the price of oil rebounds ahead of the 50-day SMA ($92.88), with the recent series of higher highs and higher lows pushing crude oil above the Fibonacci overlaps around $112.80 (161.8% expansion) to $113.70 (78.6% expansion).
- You need a break/close above the $115.00 level (23.6% retracement) to open the $120.90 level (100% region, moving above the monthly value) tall ($130.50) bringing the $141.50 area (161.8% expansion) on the radar.
- At the same time, the failure break/close above the $115.00 level (23.6% retracement) can undermine the bullish price action in crude, with a move below the $108.10 (61.8% expansion) region opening the $104.20 area (50% expansion).
— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong