West Texas Intermediate (WTI), a benchmark for U.S. oil prices, plummeted over 3% on Monday, reaching a near four-month low. This decline followed an intricate decision by the Organization of the Petroleum Exporting Countries and allies (OPEC+) on Sunday, which left the possibility open for the gradual reversal of voluntary production cuts.
The Saudi-led cartel chose to extend most of its production cuts—currently totaling 3.66 million barrels per day—until the end of 2025. However, the group also agreed to gradually unwind voluntary cuts from eight member countries starting in October.
According to analysts, this phased reduction agreement exerts downward pressure on oil prices. It allows OPEC+ members significant flexibility to increase output based on market conditions, despite the ongoing global demand slowdown caused by high interest rates and inflation.
The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations.
Investors are now looking ahead to further insights on demand, which will come on Wednesday when the Energy Information Administration (EIA) releases its weekly petroleum status report. This report will reveal gasoline consumption over the Memorial Day weekend, a key indicator as it marks the start of the U.S. driving season.
If we do not get a spectacular number on Memorial Day in the U.S., that’s going to be game over.
WTI Price Trends and Key Support Levels
Since December 2022, WTI prices have remained mostly rangebound, with neither bulls nor bears able to establish dominance. Recently, the commodity has broken down from a broadening formation just below the 200-day moving average.
Investors should closely monitor the price range between $71.50 and $67.50 amid further declines. This range has served as a support zone based on price actions over the past 17 months. If WTI prices enter this region, investors should watch for reversal signals, such as a hammer candlestick or bullish engulfing pattern, which could indicate a shift in market sentiment.
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