Oil Prices Forecast: OPEC Production Cuts Tested by Iraq’s Resumption

Highlights

• Iraqi Oil Minister’s Ankara visit raises hopes for resuming halted exports, potentially easing OPEC+ supply crunch.
• Chinese economic woes exert downward pressure on oil prices, despite Beijing’s recent moderate rate cut.
• J.P.Morgan analysts underline China’s slipping demand for mobility fuels, another damper on oil prices.

Oil Prices Waver Amid Iraqi Export Resumption and Chinese Economic Concerns

Oil prices dipped Tuesday in anticipation of resumed Iraqi oil exports, potentially tempering the supply crunch caused by OPEC+’s extended production cuts. Iraq’s oil minister Hayan Abdel-Ghani’s visit to Ankara stirred discussions around restarting oil exports via the Ceyhan terminal, previously halted by Turkey after an International Chamber of Commerce ruling. This influx of Iraqi oil may provide relief in the ongoing supply tightness.

China’s Economy Pressures Oil Prices

Conversely, concerns about China’s economy, the world’s second-largest oil consumer, are applying downward pressure on oil prices. Beijing’s moderate rate cut did little to soothe market anxieties, with many anticipating bolder stimulus actions amid declining economic vigor. J.P.Morgan analysts highlighted the slowing demand for mobility fuels, with growth slipping to 1.6 mbd year-to-date compared to last year.

U.S. Inventory Data Bolsters Oil

However, bolstering oil prices are projections of decreased U.S. crude oil and gasoline inventories. As the market keenly awaits data releases from the American Petroleum Institute (API) and the Energy Information Administration (EIA), U.S. economic indicators suggest a trend toward maintaining higher interest rates. This could dampen demand for oil and a myriad of consumer goods in the short term.

Potential Iraqi Exports Driving Bearish Outlook

In summary, while potential resumed Iraqi exports might alleviate some supply constraints, ongoing economic challenges in major markets like China and the U.S. are influencing a bearish outlook for oil prices in the immediate future.

Technical Analysis

Crude Oil’s current 4-hour price of $80.06 shows only a slight uptick from its preceding 4-hour position at $79.94, signaling limited bullish traction. While it trades above the 200-4H moving average of $78.80, the commodity is below the more immediate 50-4H moving average of $81.40, indicating prevailing bearish pressures. The 14-4H RSI, recorded at 43.52, underscores this weaker sentiment as it lingers below the mid-point of 50.

Currently navigating just above the main support zone of $79.05 to $78.29, and well beneath the dominant resistance bracket of $83.81 to $84.89, Crude Oil’s market stance appears predominantly bearish with room for potential downside.