Oil News: Can Crude Oil Hold 200-Day MA Despite OPEC Production Surge?

OPEC+ Production News Adds to Weekly Rout Already Driven by Ceasefire

Oil prices posted their worst weekly performance since March 2023, tumbling 12% as geopolitical risk premiums evaporated following the Israel-Iran ceasefire announcement. However, Friday’s session ended with crude closing higher despite midday selling pressure from OPEC+ production news, suggesting potential oversold conditions and short-covering after the week’s steep decline.

The energy complex collapsed from brief highs above $80 during the 12-day conflict to test the critical 200-day moving average at $65.15. Crude prices were already headed for the 12% weekly decline following the ceasefire between Israel and Iran when Friday’s OPEC+ announcement triggered additional selling. Four OPEC+ delegates confirmed plans to increase output by 411,000 barrels per day in August, yet prices recovered from midday lows to close higher.

Will OPEC+ Supply Increases Overwhelm Demand?

The production boost signals OPEC+ confidence in demand recovery, but raises questions about market absorption capacity. “The report about an OPEC increase came out and prices cratered,” said Phil Flynn, senior market analyst with Price Futures Group, describing Friday’s midday selloff.

China’s Iranian oil imports surged to a record 1.8 million barrels per day from June 1-20, according to ship-tracker Vortexa. As the world’s top oil importer, China’s accelerated purchases before the Israel-Iran conflict highlight underlying demand strength despite price weakness.

Can Inventory Draws Support Prices?

Multiple bullish inventory signals emerged this week. U.S. government data showed crude oil and fuel inventories fell with rising refining activity and demand. Independently held gasoil stocks at the Amsterdam-Rotterdam-Antwerp hub dropped to their lowest in over a year, while Singapore’s middle distillates inventories declined as net exports climbed.

“We’re getting a demand premium on oil,” Flynn noted, pointing to expectations of higher consumption in coming months. These inventory draws provided early session support before OPEC+ news dominated headlines.

Has the Geopolitical Risk Premium Disappeared?

The 12-day Israel-Iran war that began June 13 initially pushed Brent above $80 as markets priced in supply disruption risks. President Trump’s ceasefire announcement eliminated these premiums almost overnight, demonstrating oil’s sensitivity to headline risk.

“The market has almost entirely shrugged off the geopolitical risk premiums from almost a week ago as we return to a fundamentals-driven market,” said Rystad analyst Janiv Shah.

U.S. drilling activity continues declining, with the oil rig count falling for a fourth straight month to 432 rigs, matching October 2021 lows. This represents the longest declining streak since the pandemic.

Market Forecast

Friday’s higher close despite bearish OPEC+ news signals potential oversold conditions after the week’s 12% decline. The recovery from midday lows suggests short-covering and position-squaring ahead of the weekend following steep losses.

Technical levels remain critical. Oil tested but held above the 200-day moving average, creating a potential foundation for recovery. The $67.44 long-term pivot becomes an upside target if momentum builds from Friday’s bounce off the key moving average support.

OPEC+ production increases present medium-term supply concerns, while inventory draws and Friday’s price action suggest oversold conditions may limit downside. A break below the 200-day moving average opens further declines, while continued strength above this key support level could target $67.44, with additional resistance at $71.20.

More Information in our Economic Calendar.