Crude oil futures prices rose in early trading on Tuesday, after reports that the Organization of the Petroleum Exporting Countries (OPEC) was considering cutting production by more than one million barrels per day, when it meets on Wednesday as the cartel looks to confront prices that have been falling due to recession fears.
By 7:00 GMT
- The prices of futures contracts for December delivery of West Texas Crude (WTI) oil on the New York Mercantile Exchange increased by 0.37% to settle at a price of $83.94 per barrel on the New York Mercantile Exchange, after rising 1.61% in yesterday’s trading.
- And the futures contracts for December delivery of Brent crude oil (Brent) on the ICE Futures Europe Stock Exchange advanced by 0.56% to settle at a price of $89.36 per barrel, after rising by 0.80% in yesterday’s trading.
(Futures contract is a contract that obligates the buyer to buy a specific asset at a predetermined price and to be delivered at a later time in the future)
Investors in oil focused on press reports over the weekend that speculate on the possibility of a significant production cut of 1 million barrels per day or more when OPEC+ meets on Wednesday, in order to support the market at a time of lower demand due to the faltering global economy.
The price of global benchmark Brent crude reached around $130 a barrel in the wake of Russia’s invasion of Ukraine in February, when Western sanctions on Moscow raised supply concerns.
However, prices have fallen steadily as these fears are eased by the possibility of slowing demand if central banks’ policy of raising interest rates to combat inflation causes a global economic downturn.
This week’s OPEC+ meeting will be the first face-to-face meeting at the group’s headquarters in Vienna since the onset of the pandemic, adding to expectations that an important policy change will be discussed.
OPEC+ boosted production this year after record cuts in 2020 due to demand destruction caused by the COVID-19 pandemic, but the group has failed in recent months to meet scheduled increases in production, which it lost in August by 3.6 million barrels per day.
Oil prices have fallen for four consecutive months as the COVID-19 shutdown in top oil importer China curbs demand, while higher interest rates and a stronger US dollar put pressure on global financial markets, major central banks embarked on their biggest round of interest rate increases since decades, raising fears of a global economic slowdown.
Technical analysis of crude oil futures prices – oil shows signs of weakness despite its rise
The prices of the futures contracts for light sweet crude oil, the American benchmark (LIGHT CRUDE OIL FUTURES) advanced in Nymex with its recent trading at intraday levels, to achieve daily gains until the moment of writing this report, by 0.39% to settle at the price of 83.96 dollars per barrel.
The rise in oil comes amid its trading along a bearish corrective slope line in the short term, as shown in the attached chart for a (daily) period, with the continuation of the negative pressure for its trading below the simple moving average for the previous 50 days, and in addition to that, we notice that the relative strength indicators reached severe areas Overbought operations, in an exaggerated manner, compared to the price movement, which may multiply the negative pressures on its upcoming trading.
The chart was generated by . platform TradingView
Therefore, we still expect a return to the decline of oil during its upcoming trading, as long as the resistance 85.40 remains, to target again the support level 77.00.