Oil Price Forecast: OPEC+ Output Deal Boosts Market Optimism, but Global Economic Concerns Persist

James Hyerczyk
Updated: Jun 6, 2023, 05:25 GMT+00:00

WTI Oil prices slide as concerns about the global economic outlook overshadow Saudi Arabia's production cut.

WTI Crude Oil

In this article:


  • Saudi Arabia reduces output by 1 million bpd in July.
  • Concerns about the global economy outweigh supply worries.
  • OPEC+ deal aims to boost oil prices amid macroeconomic headwinds.


Oil prices experienced a slight decline on Tuesday, following gains made the previous day. Despite Saudi Arabia’s announcement of its largest output cut in years, concerns about the global economic outlook outweighed supply worries. The world’s top exporter, Saudi Arabia, revealed that its output would decrease by 1 million barrels per day (bpd) to 9 million bpd in July, resulting in an initial surge in U.S. WTI crude prices of up to $3.30. However, as the day progressed, the benchmark pulled back, ending with more modest gains.

Output Cuts Boost Prices

The voluntary output cut by Saudi Arabia, in addition to the broader deal by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to limit supply until 2024, aims to counteract macroeconomic headwinds and boost oil prices. OPEC+ is responsible for approximately 40% of the world’s crude production and has already reduced its output target by a total of 3.66 million bpd, equivalent to 3.6% of global demand.

Economic Concerns Restrain Oil

While the production cuts have taken center stage, concerns about the global economic backdrop have limited the gains. Fatih Birol, head of the International Energy Agency (IEA), stated that the probability of higher oil prices has significantly increased with the new OPEC+ agreement. However, the market is still assessing the actual impact of Saudi Arabia’s production cut and interpreting it as a bullish sign for oil.

Goldman Sachs: ‘Moderately Bullish’

Goldman Sachs analysts view the output deal as “moderately bullish” for oil markets and predict that December 2023 Brent prices could increase by $1 to $6 per barrel, depending on how long Saudi Arabia maintains its output at 9 million bpd. They note that the immediate market impact may be lower due to the time required to draw down inventories, but the news was already factored into market expectations to some extent.

Traders Look for Fed Guidance

Looking ahead, market participants are eagerly awaiting the U.S. Federal Reserve’s decision on interest rates in June and China’s May trade data, which will provide insights into the demand from the world’s second-largest oil consumer. Although higher interest rates from the Fed could potentially dampen energy demand, many analysts anticipate strong consumption given recent economic data. Furthermore, the U.S. economy is expected to showcase a robust summer travel season, driving substantial demand for gasoline and jet fuel.

China Rebound Expected

Despite limited COVID restrictions in China, the country is expected to rebound. The U.S. is recession-free, and Europe’s economy is performing well. This should drive oil demand.

Short-Term Outlook:  Optimistic

Despite global economic concerns, oil prices are impacted by Saudi Arabia’s output cut. Market participants anticipate a positive outlook due to the OPEC+ deal and strong demand expectations.

Technical Analysis

Daily WTI Crude Oil

WTI Oil is trading on the strong side of $69.97 (PIVOT), making this level support. A sustained over this level will indicate the presence of buyers. If this creates enough upside momentum then look for the move to possibly extend into $76.28 (R1) over the near-term.

A sustained move under $69.97 (PIVOT) will signal the return of sellers. This move could create the momentum needed to challenge $63.82 (S1).

Resistance & Support Levels

PIVOT – $69.97 R1 – $76.28
S1 – $63.82 R2 – $82.42
S2 – $57.52 R3 – $88.73


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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