Crude oil closed at $67.93, up $0.93 or 1.39%, despite OPEC+ announcing a production increase. Today’s high hit $68.28, the highest since June 23.
OPEC+ originally planned a 411,000 barrel per day increase but opted for 548,000 barrels per day. This follows the group’s strategy to reverse a 2.2 million barrel per day cut.
Market Outlook
The group cited a strong economic outlook and low oil inventories for its decision. They plan a gradual return of previous production levels, as decided on December 5, 2024.
Technically, oil prices remain below the 100-hour moving average of $66.48 and the 50% midpoint from April to June at $66.33. Prices are above the 200-hour moving average at $65.85.
For a move downward, the price would need to fall below these technical levels. If not, buyers may maintain control.
What we’re looking at here is a market reacting to a production boost by OPEC+ that, on the surface, might have been expected to drag prices lower. Instead, oil ticked upward, ending the day with a 1.39% rise. That’s telling. It hints that underlying demand is outweighing concerns of increased supply – or at the very least, that the pace of supply additions isn’t worrying traders for now.
Technical Analysis
The revised production gain of 548,000 barrels per day – more than anticipated – is part of a broader plan to unwind those prior cuts. That decision, anchored in their December policy guidance, is being sold as an answer to both optimistic global growth projections and thinning inventories.
Despite this, we see that prices are still brushing up against their technical constraints. To be specific, they remain comfortably above the 200-hour moving average, which now acts as a soft floor around the $65.85 mark. That level has held up well recently and could continue acting as a line of defence if there’s any selling pressure in the coming sessions.
Meanwhile, resistance sits above, around $66.48 and $66.33 – that’s the 100-hour moving average and the 50% retracement level from the April to June drop, respectively. The fact that prices are still below both offers a balancing act of sorts. Buyers haven’t taken full control, but sellers haven’t managed to push it back under the longer-term averages either.
If prices break above those levels cleanly, buying interest might grow, potentially forcing short positions to cover. The recent high at $68.28 gives the next obvious target. That level, the best since late June, may attempt to act as a cap until something shifts fundamentally or technically.
We should watch price action near those technical markers, especially at the start of next week. If sellers manage to push below the 200-hour moving average, that could change the tone quickly, especially given how orderly the current up-move looks. For now, there’s still energy behind the rally.
The larger implication is this: supply additions alone are not dampening sentiment. That might suggest traders expect consumption to remain solid, or at least steady enough to absorb these barrels. Inventories remain compressed, and that tightness gives buyers more reason to stay interested on minor dips.
If prices consolidate above $66.50, we’ve got potential for extension. But the support area beneath us will need to hold. Keep an eye on those moving averages – they carry weight, and in weeks like this, they often decide direction.
