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Crude prices are starting the week on a softer footing after breaking out to their highest levels since November 2022 on Friday. The main driver behind the move is the bullish OPEC+ backdrop. On the back of recent production cuts, allied non-OPEC producer Russia noted that it will extend current supply controls through next month. The market now widely expects that Saudi Arabia will follow suit. With the two producers recently reducing supply by around 1.5% of total global daily output, oil sentiment has improved in recent months. With further cuts expected, oil prices look poised for further gains near-term.
 

Shifting USD Outlook

The USD backdrop has also turned more supportive of oil recently. The market has heavily reduced its tightening expectations for the Fed throughout the remainder of the year. A slew of weaker-than-forecast US data points recently has diluted expectations of a further hike in September. On Friday, despite the headline NFP coming in above forecasts, a fresh drop in wage growth along with an uptick in the unemployment rate has further weighed on Fed tightening expectations. While this narrative remains intact, crude looks likely to remain supported as the USD eases.
 

Technical Views

Crude

The breakout above the 82.59 level is an important shift for crude, marking fresh highs for the year.  With momentum studies firmly bullish, the focus remains on a continuation higher while we hold above that level, targeting a move up to 93.47 next. 

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