Oil price pauses rally on OPEC+ and US suggested release of stockpiles
Oil prices currently deliberate marginal output increases by OPEC+ and the suggestion of more US crude stockpiles being released.
OPEC+ agree to marginally increase output
The Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+) have agreed to increase production of oil by 432 000 barrels per day from the first of May 2022.
Monthly increases in output previously had been at the 400 000 barrels per day level. The increase in output follows oil prices having neared all-time highs in the last month.
US to release more stockpile reserves of crude
The Biden administration is currently considering releasing over 180 million barrels of crude oil reserves over the coming months. That figure is three times larger than the International Energy Administration's (IEA) release of 60 million barrels in March.
The rebalancing conundrum
While demand for oil remains robust as economies re-emerge from the pandemic, the sanctioning of Russian crude further impacts global supply of the commodity. Hopes that the US and Iran can reach accord (on the nuclear deal) and in turn help fill supply gaps are also waning.
With only modest increases to oil output from OPEC+ and the release of US stockpiles only a temporary fix, one does feel that only peace will provide the key to the normalisation of oil prices right now.
Brent crude: technical view
The price of Brent crude has retraced to test trendline support at around the 103.00 level.
The long-term trend for oil does, however, remain up considering preference to a long bias to trade on the commodity. For long entry, traders might look for a close back above the 10780.
Should the price instead continue to retrace, we would continue to look for long entry on a bullish reversal at one of the lower support levels.
Only on a move below the 200 day simple moving average (blue line) would we reconsider our long bias to trades on oil.
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