Crude oil analysis: OPEC + increases production, crude oil prices fall to near 50-day moving average

Light crude futures opened lower in European trading on Monday, falling below a key short-term pivot of $67.31, signalling a deeper correction. Last week's rally briefly pushed prices to $70.51.

OPEC + production increase puts pressure on oil prices

Crude prices fell sharply after OPEC + confirmed plans to boost output by 547,000 barrels a day in September. The supply increase, while widely expected, marked the complete unwinding of the group's biggest production cut - about 2.50 million barrels a day, or 2.4 per cent of global demand.

While the overall figure is substantial, Goldman Sachs notes that actual supply growth is likely to total about 1.70 million barrels per day due to offsetting cuts by previously overproducing member countries.

As Opec + accelerates the recovery of crude oil supplies, the market is still assessing the impact of growing trade protectionism. The United States recently imposed tariffs on goods from many countries, adding another layer of uncertainty to the commodity market, including crude oil.

The sanctions against Russia have clouded the global supply outlook

Geopolitical risks remain high, particularly around shipments of Russian crude oil, with the US threatening to impose secondary tariffs of 100 per cent on buyers of Russian oil already affecting trade routes.

At least two Russian cargo ships bound for India have been diverted, and 1.70 million barrels a day of supplies could be at risk if Indian refineries pull out, according to ING.

However, India appeared to remain committed to maintaining energy links with Moscow, with two Indian officials confirming that the country would continue to import Russian crude despite political pressure. This stance is likely to limit recent supply disruptions, but the threat of more sanctions remains a destabilising driver.

Economic data and Federal Reserve policy

The focus now is on economic data and the Federal Reserve as this will affect growth expectations in the coming months. Tariff trade is now over as almost everything has been priced in and everyone knows there will be a deal within the 10-20% tariff range.

With the Fed's forward guidance still leaning towards accommodative policy, the outlook for growth and inflation should remain skewed to the upside for now. This should support the market, but overall, WTI crude oil should remain range-bound in the $60 and $80 price zones.

technical analysis

(WTI crude oil daily chart, source: Internet)

On the daily chart, WTI crude oil prices continue to fluctuate between the key 64.00 support and 72.00 resistance levels. Buyers may continue to enter near the support level, below which there is a clear risk, with the goal of returning to the 72.00 resistance level. On the other hand, sellers will need to break through the support level to open the door for the next drop to the 55.00 mark.

At 19:35 Beijing time, WTI crude oil was reported at $66.12/barrel, down 1.80%.