Oil prices surged by $1 following the weekend, opening at $73.80 per barrel when markets resumed trading. Prices continued to climb throughout the Asian and early European sessions, reaching a peak of $75.30 before the US market opened.
The price hike comes after OPEC+, a coalition of the Organization of the Petroleum Exporting Countries, Russia, and other allies, announced on Sunday that it would extend production cuts of 2.2 million barrels per day through December. The group decided to delay plans to increase production, citing lower prices and weak demand. This decision signals that production cuts may continue for the foreseeable future.
OPEC and Saudi Arabia have consistently stated that they do not target a specific price for oil. Their decisions, they say, are based on market fundamentals, with the goal of balancing supply and demand. However, industry analysts and rumors suggest that higher oil prices are more beneficial to OPEC members, as they lead to greater profit margins. Low oil prices, on the other hand, often strain OPEC nations, especially as production costs rise.
Haitham Al Ghais, the Secretary-General of OPEC, expressed confidence in the oil demand outlook for both the short and long term on Monday. This comes despite OPEC’s recent slight downgrade of its demand forecasts. Al Ghais acknowledged the challenges facing OPEC and global markets but pointed to positive signs, including a 5% growth rate in China and the continued strength of the US economy.
The week ahead could bring significant volatility to oil prices, as markets await key data releases, central bank meetings, and the US elections. Geopolitical concerns, including the potential for a strike by Iran on Israel, also add to the uncertainty. In addition, a possible victory by Donald Trump in the US presidential race could further influence oil prices. Rumors suggest that a Trump administration might sanction an attack on Iranian nuclear facilities, which could push prices higher.
From a technical standpoint, oil prices have gapped higher for the second consecutive week, driven by geopolitical concerns and OPEC’s production decisions. The market is closely watching the potential impact of the US elections on oil prices, particularly if Trump wins. If prices manage to surpass the key resistance level of $76.35, they could push toward the 100-day moving average around $79.00, with the psychological $80.00 per barrel mark in sight.
Currently, oil prices are facing bearish pressure. After reaching a daily high of $75.77, they have retreated to around $75.06. If prices continue to fall, a bearish daily close could lead to a retest of support levels at $72.39 and $71.00, the most recent swing lows.
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