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WTI crude oil price forecast after the newest Saudi Arabia production cut

on Jun 7, 2023
  • Saudi Arabia will cut oil production by another 1 million/day in July
  • WTI crude oil price barely reacted
  • The technical picture remains bearish, and the $60 support level is a pivotal one

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The energy market participants were stunt on Sunday as news broke out that Saudi Arabia will intervene solo in the oil market. In the past, it vowed not to do so without the support of big OPEC countries.

But on Sunday, it decided to cut production by another 1 million barrels/day in July. More precisely, it will pump only 9 million b/d in July, a level similar to the 2005-2008 period.

The move comes in the context of oil prices sliding from their pandemic highs. For example, the WTI crude oil price threatened to break below the pivotal $60/barrel area, a move that would have triggered more bearish pressure.

WTI crude oil price by TradingView

WTI crude oil price bounced on the Saudi cut, but the bearish bias remains

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Sure enough, the market reacted immediately. As a commodity, oil is very sensitive to supply and demand imbalances.

Moreover, any surprise from the top producers usually triggers an increase in volatility.

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So the WTI crude oil price did jump from last Friday’s closing levels. However, there was little or no follow-through. Moreover, the bias remains bearish, especially if the $60 support level gives way.

Head and shoulders keeps bulls away

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Those using technical analysis patterns to forecast future prices may have spotted two bearish patterns forming on the WTI crude oil daily chart.

One is a double top pattern, forming around the $120 area. Another is a head and shoulders pattern.

If the former is already completed, the latter is a bit more problematic for those looking for the WTI crude oil price to move to the upside. The problem comes from the pattern’s measured move, suggesting very depressed levels, should the market dive below the pivotal $60 area.

All in all, the market’s reaction to the Saudi Arabia production cut did nothing to alter the bearish bias. Hence, the path of least resistance remains the downside.


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