Crude oil price is down slightly today as traders react to the upbeat economic data from China, falling US inventories, and the OPEC+ meeting held yesterday. Brent is down by 0.57% while the West Texas Intermediate (WTI) is down by more than 1%.
OPEC+ increases production
The main reason why crude oil price is falling today is because of OPEC and its allies. In their meeting yesterday, the cartel decoded to gradually increase production in a bid to fight market share from non-members. The members will now start increasing production by about 1.6 million barrels every day, which is slightly lower than the 2.2 million that OPEC was pushing for.
The meeting came after OPEC published its closely-read monthly report on Tuesday. In it, the cartel said that it expects demand will increase by 7 million barrels a day in 2020. It expects demand to fall by about 8.9 million barrels this year.
Another possible reason for today’s crude oil prices is Libya, which could return to the market in the coming days. The country’s oil production has been weak since January when a Libyan commander shut production.
Crude oil demand received a boost from the Chinese statistics office. In its report today, the office said that the country’s economy expanded by 3.2% in the second quarter. A prosperous China is good for crude oil price because the country is the world’s biggest producer.
Also, it received a boost from the United States where Moderna said that its vaccine was making progress. Another report by the EIA showed that inventories declined by more than 7 million barrels in the previous week.
Crude oil price technical forecast
The Brent crude oil price is trading at $43.48. On the daily chart, we see that the price has found a lot of resistance around this level. Also, it is slightly above the 50-day and 100-day EMAs and is along the 50% Fibonacci retracement level. Further, volatility, as measured by the Average True Range (ATR) has declined to the lowest level since January. Therefore, the price is likely to break out higher as bulls target the next resistance at $45.
On the flip side, a move below $40 will invalidate this prediction. This is an important psychological level that is also along the 50-day and 100-day EMAs.