As expected crude oil prices sparked – What next?

Crude oil prices witnessed a speculative jump yesterday, prices hit a tenth month as bigger-than-expected supply cuts by Saudi Arabia and Russia pointed to tighter supplies this year.

Prices extended bumper gains from the prior session after Saudi Arabia said it will extend its current 1 million barrel-per-day cut until end-December, while Russia will maintain its 300,000 barrel per-day export curbs until the end of the year. The two will also review the cuts on a monthly basis, and adjust them according to market conditions.

Along with the Saudi supply cuts, which began in July, prospects of the U.S. economy avoiding a hard recession have helped lift oil demand and prices in recent months.

Oil prices have been suffering from a stronger dollar, as the greenback hit a near six-month high before a string of Federal Reserve speakers this week. Furthermore, concerns over slowing Chinese demand and higher-for-longer U.S. rates had chipped away at oil prices this year, as a Chinese economic recovery stalled and as the Fed largely maintained its hawkish rhetoric.

Looking ahead, Crude oil weekly inventory and China trade balance data are set to release tomorrow which will have a strong impact in the near future.

Technical Outlook

Since 30 August 2023, Crude Oil prices witnessed an abrupt bullish move. Prices gained 10% and recently touched a multi-week high of 7301.00. Today, prices traded at 7189 with a minor loss of 0.40%.

A bullish outlook given on 30 August 2023 was proven accurate and after breaching the resistance of 6780 prices witnessed a meaningful breakout. On the above chart, prices still trading above their massive resistance which points to bullish momentum remaining intact. Any temporary correction towards 7060-7070 will attract buying activities with a stop loss below 6995.00.

On the downside, crucial support is seen at 6850 and below it, only prices may retreat towards 6780-6680.