Oil prices are rising due to concerns about supply and the possibility of further production cuts. The slightly weaker US dollar and anticipation of continued production cuts by Saudi Arabia have kept the bulls in control. This quarter is expected to see the largest increase in oil prices since the first quarter of 2022.
Despite concerns about a slowdown in the Eurozone economy and problems in China’s economic recovery, it is important to note that China’s oil demand remains at a record high. However, economic concerns in other countries are affecting oil prices from a different angle. Chinese authorities have implemented stimulus measures to support the economy, but market participants fear that a lack of sustainable economic growth in China could affect oil demand.
The Saudi Energy Minister’s confirmation of production cuts by both Russia and Saudi Arabia through 2023 has kept market participants on edge. There is also the possibility of further production cuts or extensions beyond 2023. Coupled with the weaker US dollar, these factors have contributed to the continued rise in oil prices.
This week, central bank meetings will dominate markets as expectations of a monetary tightening cycle grow. The FOMC meeting on Wednesday and S&P global PMI data on Friday could have an impact on oil prices. Despite the recent rise in oil prices, there are concerns that inflation could become a bigger problem in the coming months.
From a technical point of view, both WTI and Brent have seen an upward move, with WTI showing more momentum. The recovery of the US dollar may play a role in supporting oil prices. However, the technical picture suggests that oil prices are in an extremely overbought zone.
Overall, fundamentals remain the main drivers of oil prices and a correction could be on the horizon if stability is achieved from a fundamental perspective. The key levels to watch are the support levels at $90.00 and $88.10 for WTI, and the resistance levels at $92.42 and $95.00 for WTI and Brent, respectively.
– OPEC and Their Role in Global Markets, DailyFX Education Section
– Zain Vawda, Markets Writer for DailyFX.com, @zvawda on Twitter