West Texas Intermediate (WTI) Crude Oil prices are currently under downward pressure due to a predicted rise in global supply. At present, WTI trades above $65.00 with a daily loss of 0.55%.
Ongoing increases in OPEC+ production, alongside low US refinery demand, are exacerbating this pressure. The Organisation recently confirmed increased oil supply into the third quarter, citing demand in Asia and economic improvements in the US and Eurozone.
Opec+ Production Rise
OPEC+, including countries like Saudi Arabia and Russia, has opted for a gradual production increase from July. This decision follows expected sustained demand rise in Asia and economic recovery in Western regions.
OPEC+ production in June rose by 349,000 barrels per day, totalling 41.56 million bpd. Additionally, OPEC forecasts non-OPEC liquids production to increase by 0.8 million bpd by 2025.
The American Petroleum Institute will release its Weekly Crude Oil Stock report soon. Market expectations following last week’s surprise are for a 2 million barrel draw, potentially influencing WTI dynamics.
Currently on the chart, WTI is above its $65.00 support level. A break below key levels could lead to further price decline toward $60.58; resistance is at $66.75. Momentum indicators are showing signs of weakening.
Market Outlook And Strategies
WTI Oil prices hinge on supply-demand dynamics, political events, and OPEC’s production decisions. Inventory data can shift these prices, reflecting supply-demand changes. OPEC sets production quotas, impacting Oil prices by controlling supply levels.
Given the downward pressure from rising global supply, we believe traders should adopt a bearish stance in the coming weeks. The path of least resistance for prices appears to be lower, making strategies like buying put options or initiating short futures positions seem prudent. This approach allows traders to profit from a potential decline in the commodity’s value.
This bearish view is strengthened by recent data from the U.S. Energy Information Administration, which reported an unexpected crude inventory build of 3.7 million barrels, directly contradicting market expectations for a draw. Furthermore, signs of weakening demand are emerging from key consumers, with China’s manufacturing PMI recently falling to 49.5, indicating a contraction in factory activity. This combination of rising supply and faltering demand creates a challenging environment for prices.
We are closely monitoring the $65.00 support level on the chart. A definitive break below this price would signal further weakness and likely trigger a move towards the $60.58 target for our short positions. The observed weakening of momentum indicators gives us additional confidence in this potential downward trajectory.
History shows that when the cartel increases output into a market with uncertain demand, prices can fall sharply, as seen in the prolonged sell-off of 2014-2015. While we anticipate further declines, the organization’s confidence in a second-half economic recovery presents a risk. To manage this, we could consider purchasing out-of-the-money call options with later expiration dates as a cost-effective hedge.
The upcoming weekly stock report will be a significant source of short-term volatility. A surprise draw larger than the anticipated 2 million barrels could cause a temporary price spike. We would view any such rally toward the $66.75 resistance level not as a change in trend, but as a more favorable opportunity to enter new bearish positions.
