Oil prices are poised to break below strong prior support at the 93.00 level…
It was a topsy-turvy day in the oil market as traders weighed conflicting supply news.
First, traders expected a modest increase of 100k-400k barrels per day (bpd) to OPEC production quotas … and “modest” is exactly what they got, with the group announcing that it will increase production by just 100k bpd in September . When the proverbial rubber hits the road, the actual production increases will likely be closer to a third of that, as the 100k increase will be split equally between each country and only Saudi Arabia and the UAE have any spare capacity; in other words, production quotas are not what has held most OPEC+ countries back, so higher quotas will only have a limited impact on supply and demand in the market.
West Texas Intermediate (WTI) crude oil spiked a quick $3.00 to above $96.00 in response to the lower-than-expected effective supply increase, but the rollercoaster ride was far from over.
Just a few hours later, the US released its weekly crude oil inventory data, showing a surprise build of 4,467K in inventories, compared to an expected decline of 629K barrels. The unexpected rally in supplies caught traders off guard, and US OIL continued to reverse this morning’s gains and fall all the way down to test its 5-month low near $91.00.
As the chart below shows, oil prices are poised to break below strong previous support at the 93.00 level. A confirmed break of these lows would open the door for a continuation down to previous resistance-turned-support at the Q4 highs near 85.00 later, as traders judge that declining demand will offset limited supply:
Source: StoneX, TradingView
Meanwhile, only a break above the two-month bearish channel near $98.00 would erase the near-term bearish bias in WTI.