Saudi Arabia extends voluntary cut

The production cut will continue for an additional month, by one million barrels per day

By Raed Alkhedr | @raedalkhedr | 9 August 2023

July _ Oil 103
  • Oil prices hit the jackpot once again to $83.00

  • -China’s CPI slows down in July

  • There are expectations of a global increase in crude oil production by around 1.4 million barrels per day during the current year.

Factors affecting oil prices

Despite China's decline in both oil imports and exports, the more positive economic outlook for the world's largest economy has propelled oil prices to recover all losses incurred during Tuesday's session. This resurgence was particularly evident as today's trading began on a strong note.

According to its monthly report, the U.S. Energy Information Administration (EIA) has forecasted a surge in domestic oil production, projecting record levels of 12.8 million barrels per day by 2023. This revised estimate is higher than the previously anticipated 12.6 million barrels per day.

Additionally, the report outlined expectations of a global increase in crude oil production by approximately 1.4 million barrels per day over the current year.

The Energy Information Administration noted that crude oil prices have been on an upward trajectory since June due to various factors, including Saudi Arabia's extension of voluntary production cuts and the growing worldwide demand.

Earlier, Saudi Arabia, the world's largest oil producer, announced an extension of its voluntary oil production reduction by around one million barrels per day for an additional month, encompassing September, with the potential for further extensions.

Shifting focus, data released by China's National Bureau of Statistics revealed a slowdown in the Consumer Price Index for July, exhibiting an annual contraction of approximately 0.3%, marking a decline from the previous reading of 0%. On a monthly basis, the index experienced a growth of 0.2%, surpassing June's contraction of 0.2%. Meanwhile, China's Producer Price Index displayed an annual contraction of about 4.4%, indicating an improvement compared to the previous reading of 5.4%.

WTI began the day with a notable uptick of approximately 0.87%, trading in close proximity to the $83.58 per barrel threshold.

Key technical and pivot levels

Crude oil has achieved a notable ascent, nearing the critical resistance point of $83.50, which signifies a pivotal zone of resistance. A successful breach and sustained trading above this level have the potential to foster additional upward momentum, with a target set at $92.00. Should this threshold be surpassed, the prevailing upward trend might even extend towards the $97.00 mark.

However, in the event that oil retraces from its current positions and falters in overcoming the $83.50 resistance, a downturn could ensue, testing the support level positioned at $79.70. A breach below this level could trigger further descent, leading the way to the support barrier at $78.50. If this support is compromised, the decline could potentially extend downward to $76.00.