Crude oil prices made marginal gains in the late morning European session on Monday, buoyed by the decision by OPEC+ to extend production cuts. WTI crude was at 79.90, up by $0.15 cents, while Brent futures stood at $83.56, having gained $0.23 per barrel. The commodity closed trading nearly 2% up on Friday, and a weak US dollar on Monday will likely favour its upside.
The OPEC+ cartel announced on Monday that it will extend the 2.2 million per day voluntary daily cuts into the second quarter of 2024. Furthermore, Russia announced a reduction of its output by 471,000 barrels per day. The cuts will ease the pressure that hand been building around the commodity’s price based on fears of possible oversupply. The US saw its crude oil stockpiles rise in three of the four readings released by the Energy Information Administration (EIA) in February. This aligned with the International Energy Agency’s projections of decline in the demand outlook for the commodity.
The extension of production cuts by OPEC+ is seen in some quarters as a response to the increased output by non-members, led by the US. The oil cartel is reportedly targeting stabilisation of crude oil prices above $80. The commodity is currently near that level, and the extension of the cuts comes at an opportune time when the dollar’s rally seems to be cooling down. A week dollar boosts demand for crude oil, since it is priced in dollars in the international market. Elsewhere, Yemen’s Houthi rebels have threatened escalation of attacks on cargo ships on the Red Sea. That, too, could help add risk premium to the price of crude oil.
Technical analysis
Crude oil price pivots at $80.75, and the momentum will need to keep the price above that level to avoid choppiness and bearishness. If the bears take control, the $79.30 support could be vulnerable. Prolonged control by the sellers could pull the support down to $78.60. However, if the buyers push to keep the price above the $80.75, this could enable them to target $81.50. A break past that level will negate the bearish view and build momentum to test $82.00.
