Crude oil witnessed a more than half per cent fall yesterday. Prices retreated as worries about a slowing global economy and possible U.S. interest-rate hikes outweighed supply cuts by leading exporters Saudi Arabia and Russia for August.
Saudi Arabi said yesterday that it would extend its voluntary cut of one million barrels per day (bpd) for another month to include August. The state news agency said.
However, prices dropped when business surveys revealed a decline in worldwide factory activity in June. Low demand in China and Europe made exporters’ prospects uncertain.
Fuel demand worries increased on Friday as U.S. inflation remained above the central bank’s 2% target, fueling worries about further rate hikes.
Higher U.S. interest rates might make the dollar stronger and drive up the price of oil for customers using foreign currencies.
According to Deputy Prime Minister Alexander Novak, Russia would cut oil shipments by 500,000 bpd in August in an effort to constrict global petroleum supply and raise prices in coordination with Saudi Arabia.
The cuts amount to 1.5% of global supply and bring the total pledged by OPEC+ oil producers to 5.16 million bpd.
Moscow and Riyadh have been working to support prices. Concerns about an economic downturn and a glut of supplies have caused Brent to fall from $113 a barrel a year ago.
The OPEC meeting will drive the direction
Before this week’s gathering of the Organisation of Petroleum Exporting Countries and allies, Saudi Arabia and Russia have curtailed their supply. On Wednesday and Thursday, chief executives from the biggest international oil companies are scheduled to meet with energy ministers from the OPEC states, which could provide more clues to the oil markets.
The meeting outcome will bring clutter for the crude oil prices and may change the direction for it.
Technical Outlook – Descending triangle pattern will work or not?
Crude oil retreated from the day’s high of 5890 and settled at 5753 with an intraday fall of 0.79%.
On the above chart, Since 14 April 2023, Crude oil has continued trading in a bearish trend. Prices retreated from the peak of 6843 and it made a low of 5545 on 5 May 2023.
A descending triangle pattern was noted on the above chart. Which is a bearish continuation pattern. However, the chart is not yet completed and it will confirm only when the prices will close below 5510 levels.
RSI 14 and its 9 SMA are also trading in negative territory.
All the above technical aspects are indicating that prices may remain under pressure but it could have a limited loss towards immediate support at 5580-5520. As prices would need to break below 5510 levels to give a new plunge. As failure of the break will create a probability for bounce back again.
Alternatively, on the upside massive resistance is seen at 6010 and a break above will expect to test 6080-6150.
Overall sentiment will depend on OPEC meeting headlines meanwhile economic jitters also persist which will add some pressure.