Oil Price Looks for Support from the July Lows

The oil price has bounced at the July lows and will look for another move higher. 

USOIL - Daily Chart

USOIL – Daily Chart

Crude oil found support at the $74 level and will meet resistance at the $78 barrier. If it moves above that, it could return to the mid-$ 80s. 

A majority of eighteen analysts predict that the Organization of the Petroleum Exporting Countries (OPEC) will likely extend or deepen its oil supply cuts into next year. 

The recent sharp selling in oil prices has come despite a supply drought due to OPEC cuts and the risk of further supply disruption due to escalating tensions in the Middle East. Saudi Arabia, Russia and other members have pledged total oil output cuts of about 5 million barrels per day (bpd), or 5% of daily global demand, in a series of steps that started in late 2022. 

Saudi Arabia made the first cut of 1 million barrels per day (bpd) for July and extended it to the end of the year. However, officials have said they will not tolerate oil below $80. 

“We believe that OPEC will ensure oil in a $80-$100 range by leveraging its pricing power, with a $80 floor from the OPEC put, and a $100 ceiling from spare capacity. While higher non-OPEC supply or lower GDP are downside price risks, we estimate that oil would remain close to $80 unless OPEC became less assertive,” analysts at Goldman Sachs said. 

“Prices are trading down at levels which will raise some concerns among OPEC members, particularly Saudi Arabia. The price weakness we are seeing means that it is increasingly likely that the Saudis will roll over their additional voluntary cut of 1 million bpd into early next year. Doing this should help erase the expected surplus and provide some support to the market,” ING said.

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