Commodities Analysis and Opinion

3 Reasons Oil Prices Are Getting Ready to Break Below Critical Support at $80

2024.07.10 06:13

    • Oil prices, which rose in early June, are now expected to decline in the month ahead.
    • A confluence of factors could make sure that the bears remain in charge.
    • Below, we will discuss three factors that could continue to pressure oil prices.
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prices, which climbed in early June due to a stronger and concerns surrounding Hurricane Beryl, are now likely headed downward.

This shift is driven by a confluence of factors, including the potential easing of geopolitical tensions, cracks within the OPEC+ production cut strategy, and the limited impact of Hurricane Beryl on the energy infrastructure. Below, we will discuss three factors that could influence the price of oil in the month ahead:

1. OPEC+ Production Cuts Show Cracks

For months, OPEC+ has acted as a major price supporter by limiting oil production. While the group extended these cuts through 2025 in June, they also announced a phase-out starting in October.

This decision coincides with production exceeding quotas by key members like Russia, UAE, Kazakhstan, Iraq, and even Saudi Arabia – a combined oversupply of 0.5 million barrels per day (b/d). Additionally, US production remains high, reaching historic levels in March.

If this overproduction continues, especially with production-boosting countries like the UAE and Kazakhstan gaining support, oil prices could experience a significant decline. The next OPEC+ meetings will be crucial in determining whether the group can maintain a unified front.

2. Hurricane Beryl’s Impact on Prices Appears Limited

Hurricane Beryl’s recent strike on the US east coast, particularly Louisiana and Texas, caused concern for its potential impact on Gulf of Mexico oil production, a vital US source.

While the storm tragically resulted in eight fatalities and power outages for millions, early indications suggest limited damage to production infrastructure. This means a quicker return to full capacity and normal shipping, alleviating the initial price pressure.

3. Mideast Tensions Ease

Following a period of intense conflict in the Gaza Strip, ongoing negotiations offer hope for a truce. Although Hamas has shown some concessions, a final agreement remains elusive. However, the continuation of talks is a positive sign for the market, reducing upward pressure on oil prices, including WTI and .

Crude Oil Technical View

Following the formation of a double peak around $84 per barrel, WTI crude oil prices are trending downward, targeting the support level at $80 per barrel.

3 Reasons Oil Prices Are Getting Ready to Break Below Critical Support at $80

If sellers break through this support, the path clears for a move toward the medium-term low near $73 per barrel.

***

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.



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