![](images/Logos/oilprice-logo%20copy.jpg)
The Oil Market Has Shifted Into A New Cycle
June 09,
2023
![](images/images_06_13_2023/2023-06-09_p1sgtajuzg.jpg)
Saudi Production Cuts Provide Early Boost to Crude Oil Prices
Monday began with a surge in
U.S. WTI crude oil prices, driven by Saudi Arabia's announcement of an
additional production cut of 1 million barrels per day starting in
July. The world's top oil exporter aimed to counteract the
macroeconomic challenges that had been weighing on the market. The
Saudi energy ministry revealed that the kingdom's output would
decrease to 9 million barrels per day, marking its most significant
reduction in years and contributing to recent gains in oil prices.
This unexpected decision by Saudi Arabia aligned with the broader
agreement made by OPEC+ to limit oil supply until 2024, resulting in a
bullish outlook for the short-term oil market.
Global Economic Worries Dampen Oil Prices
However, concerns over global economic headwinds deepened on
Wednesday, erasing the gains made earlier in the week. The initial
surge in U.S. WTI crude oil prices following Saudi Arabia's commitment
to output cuts was short-lived. Worries about a looming recession and
somber economic readings put a lid on oil prices, undermining the
efforts of OPEC+ to maintain stability. Additionally, reports from the
American Petroleum Institute (API) revealed an unexpected buildup in
U.S. gasoline and distillates inventories, raising concerns about fuel
consumption and the ability of the top oil consumer to maintain robust
demand.
Volatile Price Action Persists
The negative sentiment surrounding oil prices persisted on Thursday
after a news report suggested that the U.S. and Iran were close to
reaching an agreement on oil exports. WTI oil prices initially dropped
by over $3 per barrel in response to the report, which indicated a
temporary deal where Iran would reduce uranium enrichment in exchange
for some relief from oil-related sanctions. However, these losses were
partially reversed when doubts arose about the quick lifting of oil
sanctions, and the White House declared the news report false. A
spokesperson from the White House National Security Council denounced
the report as false and misleading, referencing an article published
on the Middle East Eye website. The U.S. had implemented sanctions on
Iran's oil sector in 2018 after withdrawing from the 2015 nuclear
deal.
Mixed Events Lead to
Flat-to-Lower Trade
Despite the volatility and fluctuations throughout the week, WTI oil
prices were lower overall. Concerns about a global economic slowdown
impacting demand overshadowed Saudi Arabia's promised output cuts. The
market sentiment was also affected by rising fuel stocks in the United
States and disappointing Chinese export data. The unexpected increase
in U.S. fuel inventories, particularly gasoline and distillates,
raised concerns about demand from the world's largest oil consumer.
While Saudi Arabia's additional production cut was seen as a positive
development, analysts expressed skepticism about the long-term support
it would provide to oil prices. The outlook for oil prices remained
uncertain, with supply tightening but weak demand projections for the
year.
![](images/images_06_13_2023/1686295073-o_1h2fg91k5ve712lt1jbagt99ko8.jpg)
Trend Indicator
Analysis
The main trend is down according to the weekly swing chart. A trade
through $63.90 will reaffirm the downtrend. A move through $82.91 will
change the main trend to up.
Retracement Level Analysis
The contract range is $37.18 to $99.09. Its retracement zone at $68.13
to $60.83 is the major support. The market successfully tested this
area the week-ending May 5 at $63.90 and again the week-ending June 2
at $67.03. The price action over the past three months indicates that
this area is a value zone.
The minor range is $82.91 to $63.90. Its retracement zone at $73.41 to
$75.65 is resistance. It stopped the rally this week at $75.06. The
market would have to overcome this zone to get excited about the
upside potential.
Weekly Technical Forecast
The direction of the July WTI crude oil market the week-ending June 16
is likely to be determined by trader reaction to the minor 50% level
at $73.41.
Bullish Scenario
A sustained move over $73.41 will signal the presence of buyers. This
could lead to a quick test of the minor Fibonacci level at $75.65.
Overcoming this level could trigger an acceleration to the upside.
Bearish Scenario
A sustained move under $73.41 will signal the presence of sellers.
This could lead to a retest of the major 50% level at $68.13. This
level has to hold or prices could collapse into the support cluster at
$67.03 - $63.90.
Short-Term Outlook - Cautious
This week was marked by volatility for July WTI crude oil futures. The
initial boost from Saudi Arabia's output cut was overshadowed by
concerns over global economic headwinds and rising inventories. The
report of a potential U.S.-Iran agreement on oil exports caused a
significant drop in oil prices, but the losses were later reversed
when doubts emerged and the news report was declared false.
The market sentiment is like to remain cautious, and the short-term
outlook for oil prices is limited. However, the summer driving season
in the United States and tighter global supply conditions held the
potential for upside movement, while the planned purchase of crude oil
for the Strategic Petroleum Reserve by the U.S. government may help
mitigate downside risks.
The weekly chart indicates a recurring pattern where lower prices in
value areas attract buyers, but there is limited motivation to break
out towards higher levels. The price action implies that the market
has potentially shifted into a cycle of "buy the dip" and "sell the
rally."
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
www.exactrix.com
509 995 1879 cell, Pacific.
exactrix@exactrix.com
|