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Crude oil price unfazed by rise in OPEC output amid decline in US inventories

The price of oil bounces back from a fresh weekly low even as OPEC plans to boost production, and current market conditions may keep crude prices afloat amid the larger-than-expected decline in US inventories.

Source: Bloomberg

The price of oil is on track to increase for the second consecutive week as it attempts to retrace the decline from the May high ($119.98), and it seems as though the upward adjustment in OPEC’s production schedule will do little to bring down crude prices amid the resilience in energy demand.

Source: DailyFX

Fresh updates from the Energy Information Administration (EIA) show US crude inventories contracting for three straight weeks, with stockpiles narrowing 5.068M in the week ending May 27 amid projections for a 1.35M decline.

The data suggests oil consumption will remain robust in 2022 even though OPEC’s most recent Monthly Oil Market Report (MOMR) warns that 'world oil demand is projected to average 100.3 mb/d, which is 0.2 mb/d lower than the previous month’s estimates,' and it seems as though the group will retain a gradual approach in tackling high energy prices as 'July production will be adjusted upward by 0.648 mb/d.'

U.S. Energy Information Administration

In turn, developments coming out of the US may sway oil prices ahead of the next OPEC Ministerial Meeting on June 30 amid the ongoing decline in crude inventories, with a deeper look at the EIA report showing weekly field production holding steady at 11,900K for the third consecutive week.

With that said, current market conditions may keep the price of oil afloat as signs of limited supply are met with indications of robust demand, and crude may attempt to test the yearly high ($130.50) ahead of the next OPEC Ministerial Meeting as it retraces the decline from the May high ($119.98).

Crude oil price daily chart

Source: TradingView

The price of oil appears to be on track to test the May high ($119.98) following the failed attempt to close below the $112.80 (161.8% expansion) to $113.70 (78.6% expansion) region, with a break/close above the $120.90 (100% expansion) area bringing the yearly high ($130.50) on the radar.

Looming developments in the Relative Strength Index (RSI) may show the bullish momentum gathering pace as it approaches overbought territory, with a move above 70 in the oscillator likely to be accompanied by higher oil prices like the behavior seen earlier this year.

However, lack of momentum to clear the May high ($119.98) may push the price of oil back towards the $112.80 (161.8% expansion) to $113.70 (78.6% expansion) region, with the next area of interest coming in around $108.10 (61.8% expansion).


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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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