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Understanding the Forces Driving Stability of Oil Prices

By Samir Al Khoury,

Since the beginning of this year, crude oil prices have been trading between the $75 and $85 levels and are currently hovering around the $82 level. It appears that the horizontal sideways trend will remain prevalent at this stage, especially considering the uncertainty prevailing in the oil market, which is subject to several disparate factors that keep it at these levels.

 

 

There are many positive factors for oil prices, the most prominent of which are:

·        Extending the voluntary cuts in oil production by the OPEC+ alliance by two million barrels per day until the end of June this year.

·        Continuing geopolitical tensions in the Middle East and the Red Sea.

·        Improved economic data in China – the largest oil importing country in the world – such as the consumer price index on an annual basis, which recorded a growth of 0.7%, which exceeded expectations (0.4%), and the export and import indices, which recorded 7.1% and 3.5%, respectively, and exceeded expectations.

 

 

However, many factors prevent this increase, the most prominent of which are:

·        Abundance of supply from outside OPEC+, such as the United States of America, Canada, Brazil, and Guyana.

·        The strength of the US dollar, which negatively affects oil prices, as the recent cautious statements of some members of the Federal Reserve and Federal Chairman Jerome Powell regarding the path of US interest rates, in addition to the superiority of the main and core consumer price indexes, which recorded yesterday 3.2% and 3.8%, respectively, over analysts’ expectations, indicates to the continued stubbornness of inflation.

 

 

OPEC has reduced its expectations for the growth of crude oil production for the current year by 100 thousand barrels per day, while keeping its expectations for oil demand growth unchanged.

 

 

Technically, the price of crude oil is currently trading at the level of $82, which is above the 50-day moving average (80.75), but it is hovering around the 200-day moving average (82.36), and the next challenge remains to reach and exceed the $84.30 level (the highest level recorded on March 1, 2024).

However, the DEATH CROSS intersection between the 50-day moving average in blue and the 200-day moving average in yellow still exists, and the next challenge is for this negative intersection to turn into a bullish intersection, i.e. golden, to confirm the upward trend in the price of crude oil.

As for the Relative Strength Index (RSI), it hovers around the level of approximately 50 points, which indicates neutrality, meaning that there is no clear direction for the price of oil.

 

 

 

 

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

Taurex is the trading name of Zenfinex Global Limited, Stochastic Africa SL Ltd, Zenfinex Global LLC, and Zenfinex Limited.

Zenfinex Global Limited is registered in the Republic of Seychelles with registration number: 8428731-1 and is regulated by the Financial Services Authority of Seychelles (license number SD092). Its registered office address is F20, 1st Floor, Eden Plaza, Eden Island, Seychelles.

Stochastic Africa (SL) Limited is a company registered in Sierra Leone with Company Number: SL270319STOCH05271 and is licensed by the Bank of Sierra Leone under license number BSL/SAL/2023 and with the registered office at 148D Wilkinson Road, Freetown, Sierra Leone.

Zenfinex Global LLC is a company registered with the Financial Services Authority in Saint Vincent and the Grenadines under registered number 138 LLC 2019. Its registered office is Hinds Building, Kingstown, Saint Vincent, and the Grenadines.

Zenfinex Limited is a company registered in England and Wales under registered number: 11077380. Authorised and regulated by the Financial Conduct Authority under firm reference number 816055. Its registered office is 4th Floor, 4 Eastcheap, London, EC3M 1AE, United Kingdom.

*All trading involves risk.

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