- The crude oil price has been subject to volatility since the beginning of the week.
- With the ongoing OPEC+ crisis, investors are keen on the unfolding of the oil supply status.
- The focus is on EIA’s inventory data after API recorded better-than-expected figures.
OPEC+ Crisis
The crude oil price has been experiencing high volatility since the beginning of the week. The market is reacting to the ongoing OPEC+ crisis and subsequent uncertainty on oil supply. The coalition controls about a third of the world’s oil production. Notably, it cut production to deal with the low oil demand during the pandemic period. With the recovery of global oil demand, analysts and investors expected the alliance to pump in more oil during its last meeting.
However, its members can’t seem to agree on the details of the production increase. On the one hand, the UAE wants an increase in its production benchmark. This has caused conflict with the coalition’s de facto leader -Saudi Arabia, which is opposed to the proposal. Subsequently, the OPEC+ meeting ended with no deal in sight and no definite date for the next meeting.
Analysts are optimistic that the coalition will reach an agreement, especially after seeing crude oil prices going wild. Nonetheless, uncertainties remain on whether the member states will agree to extend cuts into 2022 or if they will release the product independently.
US oil inventory data
Even with the uncertainties on oil supply, the crude oil price is finding support in the better-than-expected US weekly stockpile data. Late on Wednesday, the American Petroleum Institute (API) indicated that the amount of oil in storage had declined by 7.983 million barrels for the week that ended on 2nd July. While the figure marked a larger draw than the forecasted 3.925 million barrels, it was higher than the prior week’s reading of -8.153 million barrels.
Investors are now keen on whether the Energy Information Administration (EIA) will confirm the trend later in today’s session. Analysts expect a draw of 4.033 million barrels, which is lesser than the prior week’s decline of 6.718 million barrels.
As for gasoline inventories, the forecasted reading of -2.176 million barrels will be better than the previous increase of 1.522 million barrels. The inventory data comes at a time when gasoline prices in the United States have hit a record high.
According to AAA, the crude oil price is likely to hit a 7-year high as demand heightens. The average gas price in the US has risen by about 40% since the beginning of the year. Notably, AAA expects it to surge higher by about 20 cents by the end of the coming month. With regards to the status quo, the company’s spokesperson Morgan Dean has stated,
“Robust gasoline demand and more expensive crude oil prices are pushing gas prices higher. We had hoped that global crude production increases would bring some relief at the pump this month, but weekend OPEC negotiations fell through with no agreement reached. As a result, crude prices are set to surge to a seven-year high.”
Crude oil price technical analysis
The crude oil price has experienced significant volatility in the current week as investors react to the ongoing OPEC+ crisis. On Monday, WTI futures rose from an intraday low of 74.70 to the day’s high of 76.99. Notably, the intraday high was its highest level in close to six years.
However, the overwhelming bullish bets triggered a plunge of over 5% to 72.92 on Tuesday. The decline pushed the prices to the oversold territory with an RSI of 30. Despite the subsequent corrective rebound, it has since erased the gains.
After forming a bearish flag earlier in Thursday’s session, it has extended its losses. At the time of writing, the benchmark for US oil was down by 1.81% at 70.87. With an RSI of 30, it is back at the oversold zone. On a two-hour chart, it is trading below the 25 and 50-day Exponential Moving Averages.
Crude oil price is likely to continue experiencing high volatility for the remainder of the week. In the near term, it is likely to find support at the psychological level of 70.00. Below that level, the bears will probably retest the prior resistance-turn-support level of 69. On the upside, the resistance level to look out for is 73, which is along with the 25-day EMA. Above that level, the bulls will probably be eyeing 74.85 and 76.00.
