OPEC+ alliance voluntarily reduces oil production

Oil prices rise in response to production reduction decisions

By Raed Alkhedr | @raedalkhedr | 12 April 2023

  • Oil prices have increased from $64.00 to $82.00 in just two weeks

  • Despite the recent rise, the overall trend for oil is expected to be bearish in the medium and long term

  • Oil is currently encountering a strong resistance level at $82.50, which may impact its future movements

OPEC's decision to reduce production contributes to rise in oil prices

Oil prices have been on a strong upward trend since mid-March, rising from their lowest level near $64.00 to a high around $82.00, which is a more than 27.00% increase in just a few days. This rise was due to clear support in response to fears of a shortage of oil supply, against the backdrop of a decision by the "OPEC+" organization. Last week, they surprised the markets with a voluntary reduction in oil production starting from May and until the end of the current year.

It is worth noting that this voluntary reduction in production is in addition to the production cut agreed upon by the OPEC+ alliance countries in the meeting held last October.

Oil opened the week's trading with a noticeable decline amid the strength of the US dollar index, as investors are concerned about the growing expectations of raising interest rates by the US Federal Reserve. This could limit demand for oil.

West Texas Intermediate crude oil began trading today with a significant rise, trading near $80 per barrel.

Key levels affecting oil prices

Oil has experienced an increase in price, reaching near the resistance level of $82.50, but has not been able to surpass it. If the price fails to stay above this level, it may decrease and test the support level of $76.00. If the support level of $76.00 is broken, it may continue to decline and test the levels of $72.00 and may even fall back to the March 2020 low of $64.00.

The resistance level of $82.50 is a significant area for oil prices in both the medium and long term. Breaking through this level upwards is crucial to change the direction towards a rising trend. However, as long as the price remains below this level, the likelihood of a continuation of the downward trend is high.

If oil succeeds in breaking through the resistance level of $82.50 and maintaining prices above it, this may lead to further rises up to the $88.00 level. Breaking through this level could lead to further increases up to the resistance level of $92.00.

oil 12-4-2023