Oil Reverses Losses As Market Digest OPEC+ Cuts

WTI Crude Oil (NYMEX: CL) is currently grappling with mixed signals as recent OPEC+ decisions attempt to balance production levels amid market uncertainty. Reports initially spiked prices on a deeper output cut, but ambiguity surrounding individual quotas led to lost gains, instigating hesitancy among investors. 

The OPEC+ meeting revealed a total output reduction of 2.2 million b/d, with Saudi Arabia extending a 1 million b/d cut until Q1 2024. However, without a comprehensive breakdown of changes, doubts about adherence surfaced, potentially threatening market stability. Analysts speculate that these cuts, though substantial, might not significantly impact production levels, estimating a mere 0.38 million b/d decrease in Q1 2024, creating an environment of sideways trading. 

Technical Analysis 

The WTI Crude Oil’s 4-hour chart depicts a fragile balance. Price action hovers at $76.02/BLL, wrestling beneath crucial SMAs [20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line)], hinting at a short-term bearish bias. However, the recent upward surge of the 20-SMA above the 50-SMA and 100-SMA suggests potential bullish momentum. 

The RSI at 46.19 signifies a neutral stance, indicating both bearish and bullish pressures. Short-term opportunities lie around $77.04/BLL if the price action sustains momentum past the SMAS, with the next significant targets at the $77.71/BLL and $78.49/BLL resistance levels higher. Conversely, Conversely, a bearish push might find support at $75.08/BLL, with a break below the levels likely to leave the $74.55/BLL and $73.79/BLL levels within the bears’ reach in the short term. 


The current momentum, coupled with Saudi Arabia’s pressure for production cuts, may pave the way for an upward trajectory, with the $77.04/BBL and $77.78/BLL likely to act as significant levels of interest higher. However, a retracement could leave $75.08/BLL support levels firmly in play. 

Sources: TradingView, Trading Economics, EIA, OPEC+, Bloomberg, The Business Times. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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