Russia and Saudi Arabia Extend Supply Cuts, Boosting WTI Oil Futures
Oil futures started the week higher as Russia and Saudi Arabia extended their supply curbs beyond July. This decision helped to alleviate concerns over the oversupply in the market. The move came after communications from the Saudi energy minister indicated that the kingdom would extend voluntary output cuts of 1 million barrels per day until August. In response, Russia followed suit and announced a voluntary supply cut of 500,000 barrels per day in August.
The news of these supply cuts boosted WTI oil futures by over 1% intraday. However, oil futures remained under selling pressure due to concerns over commodity demand. Investors are worried that the tightening cycle of monetary policy in the world‘s largest economy may push the global economy into a recession. Additionally, the Bank of England, European Central Bank, and Federal Reserve are expected to continue raising interest rates this month, which further weighs on oil prices.
On the technical side, the 4H chart shows that bears are launching a counterattack after the bulls failed to overcome the 78.60% Fibonacci retracement level. This makes the $71.15 per barrel resistance an immediate support for the price action. If the break below this support is sustained, bears could attempt to break the channel, with the 61.80% Fibonacci retracement level and the daily pivot providing further support. A break below the channel could trigger a sell-off to lower levels, with support levels of $69.72 per barrel and $68.93 per barrel being important levels for bears.
On the other hand, if the bulls regain control in the near term, the market could see short-term trading opportunities at the $71.69 per barrel and $72.28 per barrel price levels. Bulls will be eyeing to recapture the key resistance level at $72.72 per barrel.
In summary, oil futures were on track for a fourth straight session of gains as Russia and Saudi Arabia’s decision to extend supply cuts boosted sentiment. With short-term price action above $72.69 per barrel, the market may present short-term trading opportunities for investors.
Sources: TradingView, Bloomberg, Trading Economics