Crude oil tries to recover $70 as OPEC considers delay in production increase

• Crude oil is up slightly toward $70 after extending Wednesday’s losses.
• OPEC is close to reaching an agreement to delay its production increase to support oil prices.
• The US dollar index is trading just above 101.00 amid renewed bearish pressure.

Crude oil is up nearly 1% on the day on Thursday amid headlines that OPEC has a deal in hand to delay the expected normalization of output. The original plan for the oil cartel was to increase production by an additional 180,000 barrels per day in October, but the recent weak demand outlook could put prices on a downward trajectory if OPEC opens the gates too soon and too quickly.

The U.S. Dollar Index (DXY), which tracks the U.S. dollar’s performance against a basket of currencies, is falling toward 101.00 after Wednesday’s JOLTS Job Openings data suggested labor market conditions are easing quickly. Not only were the previous month’s numbers revised down, but the actual number for July was well below 8 million. In this scenario, markets begin to price in more rate cuts from the US Federal Reserve (Fed), weighing on the US dollar.

On Thursday, traders will look to the ADP employment report and weekly jobless claims for more clues about the state of the US labor market.

At the time of writing, crude oil (WTI) is trading at $69.34 and Brent at $73.21.

Oil and markets news: OPEC continues to shout

• Bloomberg reports Thursday that OPEC+ is close to an agreement to delay oil supply increases, according to several delegates.
• The Bloomberg Commodity Index could continue to fall as fears of a U.S. recession emerge, which could mean a bigger drop in crude oil prices, Bloomberg reports.
• Reuters reports that Malaysia’s national oil company Petroliam Nasional Bhd. (Petronas) posted a 19% drop in net income in the first half due to higher taxes and a reduction in its asset base.
• The Energy Information Administration (EIA) will report the change in US crude oil inventories for the week ending August 30 on Thursday.
• The change in US crude oil inventories from the American Petroleum Institute (API) showed a sharp draw of 7.8 million barrels, more than doubling the 3.4 million barrels from a week earlier and the 900,000 decline expected by markets.

Technical Oil Analysis: Patience is a virtue

Crude oil price action is likely to be very difficult. From a purely technical point of view, crude oil prices could still fall a bit before finally finding vital support to bounce back from. That thesis is confirmed by the Relative Strength Index (RSI) momentum indicator, which failed to touch and test the oversold region, giving a false impression that the pullback has already begun. However, the fundamentals matter more here and the devil will be in the details of the OPEC postponement. This delay appears to be the minimum necessary to keep crude oil prices afloat at current levels.

On the other hand, $75.27 lost will be the first level to which it will return. Next, the double level at $77.43 aligns with both a downtrend line and the 200-day simple moving average (SMA). If the bulls manage to break through it, the 100-day SMA at $78.00 could trigger a rejection.

On the downside, the August 5 low at $71.17 was broken. From here, the high of $68.00 is the first level to watch, followed by $67.11, which is the lowest point of the triple bottom seen in June 2023.

US WTI Crude Oil: Daily Chart