Crude Oil News Today: Anticipated OPEC+ Supply Curbs Supporting Prices

James Hyerczyk
Published: May 28, 2024, 09:41 GMT+00:00

Key Points:

  • Oil prices steadied as traders balanced OPEC+ supply cuts and U.S. demand optimism against high U.S. interest rates.
  • UBS analyst notes real-time mobility data shows robust oil demand despite high U.S. interest rates.
  • Reuters sources indicate Saudi Arabia may cut July prices for Arab Light crude due to weakened Middle East benchmarks.
Crude Oil News Today

In this article:

Global Oil Prices Steady Amid OPEC+ Supply Curbs and U.S. Demand Optimism

Global oil prices held steady on Tuesday as traders balanced the potential continuation of OPEC+ supply cuts and expectations of strong U.S. summer fuel demand against concerns over prolonged high U.S. interest rates. On Monday, oil prices rose over 1% during muted trading due to public holidays in the U.S. and the UK, fueled by optimism around the U.S. summer driving season.

At 09:31 GMT, Light Crude Oil futures are trading $78.98, up $1.26 or +1.62%.

Interest Rate Concerns

Despite the recent upbeat sentiment, concerns over persistent high U.S. interest rates could limit further significant gains in oil prices. Higher interest rates elevate borrowing costs, potentially slowing economic activity and reducing oil demand. Last week, these concerns contributed to a weekly decline in crude prices.

Healthy Oil Demand Signals

UBS analyst Giovanni Staunovo noted that despite fears of softer demand growth due to high interest rates, real-time mobility data shows that oil demand remains robust. Supporting this, U.S. air travel has surged, with domestic flight seat numbers in May increasing by 5% month-on-month and nearly 6% year-on-year, surpassing 2019 levels, according to flight analytics firm OAG.

OPEC+ Meeting Expectations

Looking ahead, traders are focused on the upcoming OPEC+ meeting on June 2. The market anticipates that the group will maintain voluntary production cuts of 2.2 million barrels per day, which should support prices. The start of the U.S. summer driving season is also expected to bolster demand and prices.

Saudi Arabia’s Potential Price Cuts to Asia

In a separate development, Saudi Arabia may reduce July oil prices to Asia for the first time in five months. Sources suggest the official selling price for Arab Light crude could fall by 30 to 50 cents per barrel due to weakened Middle East benchmarks and Asian refining margins. The narrowing backwardation in the Dubai market has influenced this potential price cut, signaling eased supply tightness.

Market Forecast: Bullish Outlook

Given the anticipated OPEC+ supply cuts and robust U.S. summer demand, oil prices are expected to move higher in the short term. The pressure from sustained high U.S. interest rates and potential price adjustments by major producers like Saudi Arabia will be key factors to monitor. Overall, the market appears poised for a bullish run, dependent on these factors and broader economic conditions.

Technical Analysis

Daily Light Crude Oil Futures

Light crude oil futures crossed to the bullish side of the 200-day moving average at $78.18, leading to today’s huge surge. This indicator is new support.

The market is still retracing last week’s steep decline, but things won’t get interesting unless buyers can overcome the swing top at $80.11 and the 50-day moving average at $81.01.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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