WTI oil attacks the zone of strong resistance

03 April 2023 226
WTI oil attacks the zone of strong resistance

Oil prices begin the first day of trading in the second quarter with a strong upward impulse. The WTI oil immediately began testing the strong resistance zone at 81-82, which has been an unbreakable barrier for the bulls since the middle of November. By the current moment, the buyers' initial push has eased a bit, and the price has pulled back below the level of 80. Partial profit fixation on such a strong upward impulse looks quite rational, but at the same time it does not exclude the continuation of growth in the future.

 

Market participants entered the weekend in full confidence that the OPEC+ countries would not change the oil production level agreed in November at today's meeting. And the decision of additional production cuts starting in May came as a big surprise, especially since virtually all representatives of OPEC+ countries had previously announced that oil production would remain unchanged until the end of the year.

 

Among the most important OPEC+ countries, Saudi Arabia will cut oil production by 500,000 barrels per day, Iraq will cut it by 211,000 barrels, the UAE will reduce it by 144,000 barrels per day, and Kuwait will cut it by 128,000 barrels per day. Altogether, the additional decrease in production will exceed 1.15 million barrels per day. In addition, Russia has extended its own production cut by 500,000 barrels per day until the end of the year, which will additionally limit the volume of supplies to the world markets.

 

Since many OPEC+ members still do not produce oil according to quotas, the actual level of production reduction will be lower than announced, approximately in the range of 700 thousand to 1 million barrels per day. However, this is in any case a very significant reduction, and analysts are already actively revising their forecasts for the price of "black gold" upwards. The levels near the benchmark level of $100 per barrel are again becoming actual growth targets.

 

The current pullback in oil prices may continue to the range of 77.5-78.5, where changed fundamental conditions will cause a new wave of price growth and another attack on the resistance zone of 81-82.

 

 

The following trading strategy option can be suggested:

 

Buy WTI oil in the range of 77.5-78.5. Take profit – 81. Stop loss – 76.5.

This content is for informational purposes only and is not intended to be investing advice.

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