Crude oil price has continued to find support in the move by OPEC+ member states like Russia and Saudi Arabia to cut production. Even so, demand concerns from China and the US are curbing the asset’s price gains.
Expectations of tighter supplies offset demand concerns in China and the US; an aspect that boosted crude oil price to its highest level in over three months on Wednesday. On the one hand, the reported rise in US crude oil inventories, coupled with weak Chinese data have continued to curb the asset’s upward movement.
Data released on Tuesday showed that crude oil imports in the leading importer of the commodity – China – dropped by 18.8% from the prior month to the lowest daily rate recorded since January. Granted, it was up by 17% on a year-over-year basis.
The reported build in US oil inventories further curbed the recorded price gains. According to the Energy Information Administration (EIA), US crude oil production is expected to surge by 850,000 bpd to a record 12.76 million bpd in 2023.
Even so, talks of tighter supplies from OPEC+ have continued to support crude oil prices. Last week, Saudi Arabia extended its voluntary production cut of 1 million bpd to the end of September. Similarly, Russia indicated that it will cut its oil exports by 300,000 bpd in the same month.
Brent crude oil price analysis
Crude oil price has remained close to the three-and-a-half months high hit at the start of the week at 86.83. As at the time of writing, Brent oil was at 86.40 having rebounded from Tuesday’s intraday low of 83.48.
A look at its daily chart shows the commodity trading above the 25 and 50-day exponential moving averages. The bulls regained control of the market about a month ago as indicated by the formation of the golden cross. The bullish pattern forms when the short-term (25-day EMA) crosses the long-term (50-day EMA) to the upside.
In the short term, Brent crude oil price may face resistance at 87.57. At that level, it may form a bearish double top pattern, which may yield a pullback. Even so, I expect the asset to continue trading above the support at 82.49. In fact, a move below this level will invalidate this bullish thesis.
On the upside, the entry of additional buyers into the market may push crude oil price past the aforementioned resistance zone of 87.57 as the bulls strive to retest the crucially psychological zone of 90.00. Notably, that has been an evasive level since mid-November 2022.