Oil prices extend their rally for a fourth consecutive day on Wednesday with tensions building up towards the OPEC+ meeting at the beginning of June.

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Recent reports from Bloomberg Intelligence are pointing to an Oil deficit for the second half of 2024 in case OPEC+ maintains the current production cuts in place. Meanwhile, OPEC+ itself is undercutting its own efforts amid reports that several OPEC members are not adhering to their promised production cuts. 

Meanwhile, the US Dollar Index (DXY), which tracks the performance of the US Dollar against a basket of six major currencies, trades stronger after Minneapolis Federal Reserve President Neel Kashkari spooked markets by floating the idea that a rate hike is still on the cards. This pushed markets into risk-off mood, with equities dropping lower and the Greenback moving higher against its main peers. 

At the time of writing, Crude Oil (WTI) trades at $80.33 and Brent Crude at $84.62.

Oil news and market movers: OPEC talk of the town

• Chinese Oil buyers are warning of less demand as they slash their production rates with the current Chinese housing market crisis and overall less demand for plastics due to ESG push in Europe and the US. 
• Bloomberg reports that OPEC has been using active supply management in order to keep Oil prices supported. 
• UBS strategists issued a note on Wednesday, favoring investments in Oil over Gold with more upside potential for Oil against precious metals.
• Tensions remain elevated in the Middle East with Israel’s opposition parties reportedly looking for ways to oust current Prime Minister Benjamin Netanyahu.  

Oil Technical Analysis: Substantial recovery

Oil prices have recovered in recent days, printing a new fresh high for May right at the end of month. Although it might look tempting for traders to jump, risk of upside resistance is ample and this build up could be a classic “buy the rumor, sell the fact” type of event, with the possibility that the upcoming OPEC meeting disappoints markets. 

On the upside, the 55-day Simple Moving Average (SMA) at $81.31 and the descending trendline at $81.85 are forming an area with a lot of resistance. Once broken through there, the road looks quite open to head to $87.12. 

On the downside, a big support area is present with both the 100-day SMA at $78.95 and the 200-day SMA at $79.57. Adding to these, there is an ascending trendline, forming a trifecta of support levels that should avoid another steep decline. Should those levels not hold, a revisit of May’s low near $76.00 looks inevitable. 

US WTI Crude Oil: Daily Chart

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