Crude oil price has recouped some of Wednesday’s losses ahead of the OPEC+ decision on supply. Since August, the alliance has been increasing production gradually by 400,000 bpd each month. The decision was aimed at gradually reviving output after the unprecedented cuts at the peak of the COVID-19 pandemic in 2020.
Notably, the latest coronavirus variant -Omicron – appears to have complicated that program. There are growing concerns that the variant will impact travel during the holiday season. Besides, the Thursday meeting comes at a time when the US, Japan, India, South Korea, and China have publicized their intentions to release oil from their strategic petroleum reserves (SPRs).
Based on these factors, OPEC+ may decide to pause on its supply program. Notably, this forecast has offered some relief to crude oil price. However, investors remain concerned about the probable impact of Omicron on global demand.
According to inventory data released by EIA on Wednesday, gasoline stockpiles rose by 4.029 million barrels for the week ending on 26th November. In the previous week, the amount in storage had declined by 603,000 barrels. At the same time, crude oil inventories were down by 910,000 barrels compared to the prior week’s build of 1.017 million barrels.
Over a span of one week, Brent futures have dropped by 19.12% from a high of 82.50. At the time of writing, the benchmark for global oil was up by 0.46% at 69.27. On a two-hour chart, it remains below the 25 and 50-day exponential moving averages.
I expect crude oil price to continue finding resistance at the psychological level of 70.00 ahead of the highly anticipated OPEC+ meeting. If the alliance decides to pause on its current program, the levels to look out for will be along the 50-day EMA at 73.12 and the psychologically-crucial zone of 75.
On the flip side, a continuation of the ongoing plan may have the bears retest November’s low of 67.51. Below that level, the next target will likely be at 65.