Today, June 5th, 2023 – crude oil prices started the session with a strong rise. It reached an anticipated target of 73.80. This upward movement was influenced by Saudi Arabia’s decision to reduce oil production. In fact, it is important to note that the price is encountering significant resistance at this level. Thus resulting in a slight bearish bias. Nevertheless, a bullish outlook remains to pave the way for further gains, potentially reaching 76.10.
Crude Oil Price Hits the Target – Analysis
Consequently, the bullish trend remains intact and active for the foreseeable future, despite the possibility of minor bearish fluctuations driven by negative signals from the stochastic oscillator. It is worth considering that breaching the support level at 71.55 would halt the expected upward movement and potentially trigger a reversal toward a downward trend.
The projected trading range for today will be between the support level of 71.20 and the resistance level of 74.50.
Overall, the prevailing trend for today is bullish, with the potential for further price appreciation in the crude oil market.
Saudi Pledges Big Oil Cuts in July
Saudi Arabia has announced significant oil production cuts for July, in addition to the extended agreement by OPEC+ to limit supply until 2024, in an effort to bolster declining oil prices.
According to the energy ministry, Saudi Arabia’s oil production should decrease to 9 million barrels per day (BPD) in July, marking a decline from approximately 10 million BPD in May. This reduction represents the largest cut in output in several years.
The collaboration between the Organization of the Petroleum Exporting Countries (OPEC) and allied nations, led by Russia, known as OPEC+, accounts for roughly 40% of worldwide crude oil production. Therefore, the group’s policy decisions hold substantial influence over oil prices.
At the end of the trading week, Brent crude oil reached the price of $76.
With ample spare capacity and storage, Saudi Arabia is the sole OPEC+ member capable of readily adjusting production levels. The group of oil producers implemented record production cuts during the initial stages of the COVID-19 pandemic in 2020, destabilizing the market. The country’s flexibility enabled it to respond swiftly to the excess supply.
Extension of Production Cuts until The End of 2024: OPEC+ Agreement
OPEC+ has decided to extend its existing cuts of 3.66 million barrels per day. It is equivalent to 3.6% of global demand until the end of 2024. These cuts include the 2 million BPD agreed upon last year, as well as the voluntary cuts of 1.66 million BPD agreed upon in April.
Originally, the previous cuts should have expired at the end of 2023. However, after seven hours of discussions, OPEC+ reached a broader agreement on output policy and decided to prolong the cuts for an additional year.
Accusations from Western nations, dating back to the start of Russia’s invasion of Ukraine in February of the previous year, have alleged that OPEC manipulated oil prices. Thus undermining the global economy through high energy costs. Additionally, OPEC has been accused of aligning with Russia.
Aside from extending the current production cuts, OPEC+ has also agreed to further reduce overall production targets from January 2024. Thus resulting in a combined target of 40.46 million BPD. However, it is worth noting that some of these reductions will not have a significant impact. The reason is that the group has adjusted targets for Russia, Nigeria, and Angola to align them with their current production levels.
In contrast, the United Arab Emirates has been granted permission to increase its output targets by approximately 0.2 million barrels per day. Subsequently reaching a new target of 3.22 million BPD.