Crude oil price edged higher on Tuesday as the market digests the potential production cuts by OPEC. The warning by Saudi Arabia comes amid the uncertainties that have continued to shape discussions over the revival of the Iranian nuclear deal.
Concerns over tight supplies have heightened after Saudi Arabia warned over potential output cuts by OPEC. At the peak of the coronavirus pandemic, the coalition made production cuts in an effort to boost crude oil price that had plunged to a 21-year low. Fast forward to mid-August when Brent oil dropped to a six-month low amid concerns that the persistently high inflation may result in a recession and oil demand destruction by extension.
On Monday, Saudi Arabia’s state news corporation, SPA, cited the country’s Energy Minister as stating that OPEC+ has both the flexibility and means necessary to deal with arising challenges. According to the minister, the alliance is ready to cut production with the intent of correcting the recent decline in crude oil price that has been driven by macro-economic woes and low market liquidity.
The warning appears to offset the probable return of Iranian oil. Even so, the uncertainties continue to rock discussions over the Iranian nuclear deal. Last week, the European Union noted that Iran’s reponse to its “final proposal” of reviving the 2015 deal was constructive.However, on Monday, Iran accused the US of stalling and the EU of inaction.
Crude oil price prediction
Brent futures edged higher in early Tuesday trade while remaining below the psychologically crucial level of 100. A look at its daily chart indicates that the commodity may remain under pressure as it is still below the 25 and 50-day exponential moving averages.
In particular, I expect crude oil price to hover around 97.43 in the immediate term as it finds resistance at 98.97, which is along the 25-day EMA. Even with the expected volatile trading, a move above the aforementioned level will likely have Brent oil see-saw around 100 as the bulls lack enough momentum to break out of that zone.
On the lower side, I expect the futures to hold steady above 90.00. In the short term, 94.52 is a support level worth watching.