Crude oil has been sputtering, and OPEC+ isn’t expected to provide much relief next week.
Ministers from the energy cartel, led by Saudi Arabia and Russia, are scheduled to meet on Thursday, August 1. Reuters reported on July 18 that they will probably let oil production increase as previously agreed. The increased supply could arrive at a time of weaker demand around the world.
The OPEC+ meeting also follow’s TradeStation’s decision to lower day-trading margin rates for popular energy futures. The change covered crude oil, heating oil and gasoline, plus their mini versions. Here’s a list of the symbols:
- Crude oil (@CL)
- E-mini crude oil (@QM)
- Heating oil (@HO)
- E-mini heating oil (@QH)
- RBOB gasoline (@RB)
- E-mini RBOB gasoline (@QU)
Weaker Demand?
China reported lower-than-expected gross domestic product last week, prompting banks like Goldman Sachs and Barclays to cut growth forecasts. That could result in less demand from the Asian country, which is the world’s biggest oil importer. Bloomberg also reported that a loaded tanker was recently forced to dump its cargo at a steep discount in South Korea.
“Sellers struggled to find buyers for unsold” North Sea oil, the newswire said.
The U.S. market has additionally seen tepid demand for for gasoline, with inventories rising and refinery margins narrowing. Domestic production also remains near record levels and is up 7.7 percent in the last year, according to the Energy Department. There are additional expectations that a second Trump Administration would further encourage American drilling.
Another potential consideration is investor positioning: Commitment of Trader data from the Commodities Futures Trading Commission (CTFC) showed non-commercial long positions at a three-month high last week. Unwinding those bullish trades could generate selling pressure. (Investors apparently built the long positions expecting hurricanes and Middle East tensions to drive up crude oil prices.)
Charting Oil
The chart above shows some potentially significant patterns for crude oil futures (@CL).
First is the falling trendline since last September. That series of lower highs over multiple quarters may reflect a lack of long-term bullishness. It could also be noteworthy that @CL has remained below its previous peaks in March and June 2022, shortly after Russia invaded Ukraine.
Second, the moving average convergence/divergence oscillator (MACD), has been falling. The 21-day exponential moving average is sliding as well. Both of those indicators may reflect bearishness in the short-term.
Third is the price zone around $79, where prices bounced and stalled at various times in the past year. Crude oil most recently pushed below it. Has support broken?
In conclusion, oil has struggled to make new highs as demand weakens and global producers plan to increase supply. These points may impact trading and sentiment into the big OPEC+ meeting next week.
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