Crude oil finished at $67.93, rising by $0.93 or 1.39%, even after OPEC+ announced a production increase. Today’s high reached $68.28, the highest since June 23. Initially, OPEC+ planned to increase production by 411,000 barrels per day but decided on a larger increase of 548,000 barrels per day. This change is part of their strategy to reverse a previous cut of 2.2 million barrels per day.

Market Outlook

The group pointed to a strong economic outlook and low oil inventories as reasons for the production hike. They aim for a gradual return to former production levels, as agreed upon on December 5, 2024. From a technical standpoint, oil prices are currently below the 100-hour moving average of $66.48 and the 50% midpoint from April to June at $66.33. However, they remain above the 200-hour moving average at $65.85. For prices to drop further, they would need to fall below these technical levels. If that doesn’t happen, buyers may continue to dominate the market. Interestingly, the market reacted positively to OPEC+’s production increase, which might have normally been expected to lower prices. Instead, oil prices rose by 1.39%. This suggests that demand is stronger than concerns about increased supply, or at least that traders are not overly worried about the current pace of supply increases.

Technical Analysis

The higher production target of 548,000 barrels per day exceeds expectations and is part of a larger plan to reverse previous cuts. This decision is based on positive global growth projections and decreasing inventories. Despite this, prices continue to face technical limits. They remain comfortably above the 200-hour moving average, which now acts as a cushioning floor at around $65.85. This level has held strong recently and may provide support against selling pressure in the coming days. Resistance levels are seen above, at around $66.48 and $66.33—the 100-hour moving average and the 50% retracement level from the April to June decline, respectively. Being below these levels allows for a bit of balance; although buyers aren’t fully in control, sellers haven’t pushed prices below the longer-term averages. If prices successfully break above these resistance levels, buying interest could increase, possibly causing short positions to cover. The recent high at $68.28 stands as the next target. This level, the highest since late June, may act as a ceiling until a significant change occurs. It’s important to monitor price movements near these technical indicators, especially at the beginning of next week. If sellers succeed in pushing prices below the 200-hour moving average, the market’s direction could shift rapidly, considering how smooth the current rise appears. For now, the rally has momentum. The bigger picture here is that supply increases alone aren’t dampening market sentiment. This could indicate that traders expect steady consumption, enough to absorb the extra barrels. With inventories still tight, buyers have strong reasons to remain engaged during small dips. If prices hold above $66.50, there is potential for further gains. However, the support levels underneath must hold firm. Keep an eye on those moving averages; their significance often dictates market direction, especially during weeks like this. Create your live VT Markets account and start trading now.

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