WTI crude oil surpasses $73 amid OPEC+ and geopolitical events, despite firm USD
- WTI crude oil grinds higher after week-start gap towards the north, prints three-day uptrend.
- OPEC+ extends production cut deal into 2024, Saudi Arabia pledges for more output reduction.
- US-China fears escalate amid no talks in Shangri-la Dialogue, Navy presence in Taiwan Strait.
- Firmer US Dollar, challenges to risk prods Oil buyers ahead of key US, China PMIs.
WTI crude oil pares intraday gains around $73.20, after the week started with a gap towards the north, as headlines suggesting challenges to the Oil output contrast with the US Dollar’s run-up. Also likely to weigh on the black gold could be the cautious mood ahead of the key China and US data, as well as the risk risk-off mood.
The Organization of the Petroleum Exporting Countries and allies led by Russia, collectively known as OPEC+, agreed on a new output target of 40.46 million barrels per day (mb/d) from 2024 during its June 4 Ministerial meeting.
Not only that, Saudi Arabia’s readiness for more output cuts also allowed the black gold to begin the week on a front foot. In this regard, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said on Sunday, “Saudi Arabia to make extra 1 mln b/d output cut from July,” reported Reuters.
On a different page, escalating geopolitical concerns emanating from the Shangri-la Dialogue held in Singapore and the Russia-Ukraine war also allow the WTI crude oil buyers to remain hopeful. The Shangri-la Dialogue in Singapore renewed geopolitical fears surrounding the US and China amid no meeting of the policymakers of both nations, as well as an incident suggesting escalating war fears among the Sino-American navies in the Taiwan Strait. Furthermore, news from Russian Defense Ministry suggesting large-scale military operations by Ukraine added to the Russia-Ukraine war fears and allow the Oil buyers to remain hopeful.
However, the risk-off mood joins the recently firmer US Nonfarm Payrolls (NFP) to underpin the US Dollar strength and prod the WTI bulls of late.
That said, the US Dollar Index (DXY) renews its intraday high around 104.20 while extending the previous day’s recovery from a one-week low. It should be noted that the corrective bounce in the US Treasury bond yields contrasts with the mildly offered S&P500 Futures to also challenge the Oil buyers.
Looking forward, the energy benchmark may witness further consolidation of the gains if today’s China Caixin Services PMI and US ISM Services PMI for May print downbeat figures and challenge the energy demand outlook, especially amid the firmer US Dollar.
Technical analysis
Unless providing a daily close beyond the 50-day Exponential Moving Average (EMA), around $73.60 at the latest, the WTI crude oil’s recovery remains doubtful.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
