Oil Price Forecast: Sellers Dominate as OPEC+ Production Cut Hopes Dim

James Hyerczyk
Published: May 25, 2023, 11:09 GMT+00:00

Russia's remarks dampen OPEC+ production cut prospects, but a surprising drop in U.S. crude inventories supports oil prices amidst bearish sentiment.


In this article:


  • Russia’s remarks dampen expectations for OPEC+ production cuts.
  • Uncertainty over U.S. debt negotiations weighs on oil prices.
  • Unexpected drop in U.S. crude inventories provides some support.


Oil prices are lower on Thursday following remarks from Russian Deputy Prime Minister Alexander Novak, who downplayed the possibility of additional production cuts by OPEC+ at their upcoming meeting. However, various factors influenced the market, including statements from Saudi Arabia’s energy minister and ongoing uncertainty over U.S. debt negotiations.

On the positive side, there was an unexpected significant drop in U.S. crude oil inventories. This was reported by the Energy Information Administration (EIA).

At 10:50 GMT, WTI Oil was trading at $72.81, down $1.37 or -1.85%. The United States Oil Fund ETF (USO) settled at $65.68 on Wednesday, reflecting an increase of $0.81 or +1.25%.

Supply Dynamics

Novak, quoted by Izvestia newspaper, expressed skepticism about the implementation of new measures for production cuts, citing previous decisions made regarding voluntary reductions in oil production by certain countries. This suggests that OPEC+ may not pursue further output cuts at their meeting on June 4. Additionally, the possibility of Saudi Arabia unilaterally reducing oil production or coordinating a wider OPEC+ reduction was seen as a means to support prices and deter speculators who have short positions in oil.

Demand Dynamics

Saudi Arabia’s energy minister’s warning, cautioning short-sellers to be prepared for potential consequences, sparked a belief among some investors that OPEC+ might contemplate additional output cuts. These investors anticipated such cuts to be discussed at the June 4 meeting.

Short-term Forecast

The remarks from Novak dampened expectations for further production cuts, potentially contributing to the bearish sentiment in the short term. Uncertainty surrounding U.S. debt negotiations also weighed on prices, as progress in raising the federal government’s borrowing limit remained unresolved.

However, the unexpected and significant decrease in U.S. crude oil inventories reported by the Energy Information Administration provided some support to prices.

In summary, oil prices declined as Novak downplayed the likelihood of additional OPEC+ production cuts. This was accompanied by uncertainty over U.S. debt negotiations. However, the market received some support from an unexpected drop in U.S. crude oil inventories.

Technical Analysis

Daily WTI Oil

WTI Oil is trading on the strong side of $72.57 (S1). This has put the market on a path toward the next upside target at $78.02 (PIVOT).

A sustained move under $72.57 (S1) will indicate that sellers have returned. If this creates enough downside momentum then look for the selling to possibly extend into $68.49 (S2) over the near-term.

Resistance & Support Levels

S1 – $72.57 PIVOT – $78.02
S2 – $68.49 R1 – $82.10
S3 – $63.04

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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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