Brent crude oil price breaks above the $40 mark and above the 100-day moving average as bullish momentum accelerates on fast recovery hopes and on expectations that the world’s oil producers will reach an agreement to extend supply cuts. OPEC and allies will hold their next meeting on Thursday. OPEC+ member agreed in April to cut crude oil production by 9.7 million barrels per day, almost 10% of global production output.
The oil production cuts started on May 1 and are set to run through June. Under the deal, the production cuts will then be tapered back to 7.7 million barrels per day from July through the end of the year, and 5.8 million barrels per day from January 2021 through to April 2022.
The crude oil price has also supported from storm activity in the Atlantic as a third storm formed near the southern Gulf of Mexico.
Crude oil and other commodities have also benefitted on optimism that lifting the coronavirus lockdown and stimulus measures may boost economic recovery.
The American Petroleum Institute reported that U.S. crude oil inventories fell by 483K barrels in the week ending May 29.
The Brent crude oil price is 0.99% higher at $39.98, giving up some of the morning gains but holds above the 100-day moving average that might provide the spark for another leg higher. The short term outlook is positive now and a credible settlement today above the 40 mark might attract more buying interest. In case the crude oil price fails to hold above the 100-day moving average, then a correction will follow down to $38.
On the upside, the Brent crude oil price first resistance stands at $40.51 the daily high. If the Brent oil price breaks above $40.51, the next hurdle will be met at $45.64 the high from March 9. Next resistance stands at $51.28 the 200-day moving average.
On the other side, initial support for Brent crude oil price is at $39.59 the daily low. Next support zone for crude oil price will be met at $38.63 the low from yesterday’s trading session. Moving lower, the next support stands at $34.94 the low from May 29.