Crude oil prices have witnessed an upward trend, climbing above the $70 mark. This comes as the market braces for the OPEC+ meeting scheduled for Thursday. The price has been on an upward trajectory for two consecutive days.
Geopolitical concerns have also added to the market’s nervousness. US President-elect Donald Trump has issued a threat, stating that he would plunge the Middle East into war if the hostages held by Hamas are not released by the time he assumes office in January.
Simultaneously, there are speculations regarding OPEC+ supply plans. Bloomberg reports suggest that OPEC+ might potentially delay its production normalization output by six months, which could deviate from market expectations of a three-month delay. This has the potential to surprise both allies and rivals in the market.
The US Dollar Index (DXY), which gauges the performance of the US dollar against a basket of currencies, is showing a marginal increase within a narrow range in anticipation of Friday’s Nonfarm Payroll numbers. Traders seem to be adopting a cautious stance, waiting to make significant moves based on the last jobs report of 2024. Additionally, Federal Reserve Chairman Jerome Powell is set to make an appearance on Thursday, although no major market-moving comments are anticipated.
As of the time of writing, Crude Oil (WTI) is trading at $70.08, while Brent Crude stands at $73.98.
In the realm of oil news and market influencers, veteran OPEC+ observer Grant Smith has cautioned in a recent post that OPEC+ might have to introduce an unexpected development at Thursday’s meeting to substantially boost oil prices. The possibility of a six-month pause until the second half of 2025 has been raised, as per Bloomberg reports.
The Energy Information Administration (EIA) is set to release its weekly crude stockpile change figures at 15:30 GMT. The market anticipates a drawdown of 2.06 million barrels, following a draw of 1.844 million barrels last week. However, the overnight crude stockpile change numbers from the American Petroleum Institute (API) showed an unexpected build of 1.232 million barrels, contrary to the expected drawdown of 2.06 million barrels and partially offsetting the significant drawdown of 5.935 million barrels seen last week.
From a technical analysis perspective, crude oil prices may be inching up due to the remarks of President-elect Donald Trump and the growing speculation among some analysts about a potential six-month delay in OPEC+ production normalization. However, with these factors already being factored into the market, there is a risk that the OPEC meeting could lead to a “buy the rumour, sell the fact” scenario. In such a case, the current drivers could quickly lose their momentum and cause crude prices to reverse.
On the upside, the crucial levels of $71.46 and the 100-day Simple Moving Average (SMA) at $71.79 pose significant resistances. The 200-day SMA at $76.10 is relatively distant but could potentially be tested if geopolitical tensions escalate further. In the event of a rally towards the 200-day SMA, the key level of $75.27 could still impede any upward movements.
Conversely, traders should look towards $67.12, a level that supported the price in May and June 2023, for the first level of support. If this breaks, the 2024 year-to-date low of $64.75 would come into play, followed by $64.38, the low from 2023.
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