OPEC Impact

Oil prices are pushing higher on Monday following news over the weekend that OPEC+ will extend its current supply cuts deeper into 2024. The current curbs, which total around 2 million barrels per day, will now run into the middle of the year after the group agreed a further extension was necessary to help avoid the market swinging into surplus. Alongside the extension, Russia has agreed to deepen its cuts by an extra 471k barrels per day over the same period. The move news reaffirms the group’s desire to help bolster oil prices at a time when fears over the health of the Chinese economy as well as soaring US production have been weighing on prices.

Middle East Tensions

Alongside the production cuts oil prices are also trading higher on the back of fresh news linked to attacks in the Red Sea. A UK cargo ship was reported to have sunk in the Red Sea following a missile attack by Houthi rebels. With violence in the region ongoing, more ships are diverting, putting a risk premium on oil distribution which is also driving prices higher.

Fed’s Powell on Watch

Looking ahead this week, traders will be keeping an eye on any further news out of the Middle East given the risk of fresh airstrikes following the sinking of a UK ship. Additionally, USD will also be on watch with Fed’s Powell due to give his semi-annual testimony before Congress this week. Given the current backdrop, any fresh USD weakness would be firmly bullish for oil prices.

Technical Views

Crude

The rally in crude prices has seen the market breaking out above the 77.64 level as the bull channel continues. With momentum studies bullish, focus is on a test of the channel highs next and the 82.59 area. This is a key resistance level with a break here seen as firmly bullish. 

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