📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

3 Reasons Oil Prices Are Getting Ready to Break Below Critical Support at $80

Published 10/07/2024, 06:59 pm
LCO
-
CL
-
    • Oil prices, which rose in early June, are now expected to decline in the month ahead.
    • A confluence of factors could make sure that the bears remain in charge.
    • Below, we will discuss three factors that could continue to pressure oil prices.
    • Unlock AI-powered Stock Picks for Under $8/Month: Summer Sale Starts Now!

Oil prices, which climbed in early June due to a stronger US dollar and concerns surrounding Hurricane Beryl, are now likely headed downward.

This shift is driven by a confluence of factors, including the potential easing of geopolitical tensions, cracks within the OPEC+ production cut strategy, and the limited impact of Hurricane Beryl on the energy infrastructure. Below, we will discuss three factors that could influence the price of oil in the month ahead:

1. OPEC+ Production Cuts Show Cracks

For months, OPEC+ has acted as a major price supporter by limiting oil production. While the group extended these cuts through 2025 in June, they also announced a phase-out starting in October.

This decision coincides with production exceeding quotas by key members like Russia, UAE, Kazakhstan, Iraq, and even Saudi Arabia – a combined oversupply of 0.5 million barrels per day (b/d). Additionally, US production remains high, reaching historic levels in March.

If this overproduction continues, especially with production-boosting countries like the UAE and Kazakhstan gaining support, oil prices could experience a significant decline. The next OPEC+ meetings will be crucial in determining whether the group can maintain a unified front.

2. Hurricane Beryl's Impact on Prices Appears Limited

Hurricane Beryl's recent strike on the US east coast, particularly Louisiana and Texas, caused concern for its potential impact on Gulf of Mexico oil production, a vital US source.

While the storm tragically resulted in eight fatalities and power outages for millions, early indications suggest limited damage to production infrastructure. This means a quicker return to full capacity and normal shipping, alleviating the initial price pressure.

3. Mideast Tensions Ease

Following a period of intense conflict in the Gaza Strip, ongoing negotiations offer hope for a truce. Although Hamas has shown some concessions, a final agreement remains elusive. However, the continuation of talks is a positive sign for the market, reducing upward pressure on oil prices, including WTI and Brent crude.

Crude Oil Technical View

Following the formation of a double peak around $84 per barrel, WTI crude oil prices are trending downward, targeting the support level at $80 per barrel.

If sellers break through this support, the path clears for a move toward the medium-term low near $73 per barrel.

***

This summer, get exclusive discounts on our subscriptions, including annual plans for less than $8 a month!

Tired of watching the big players rake in profits while you're left on the sidelines?

InvestingPro's revolutionary AI tool, ProPicks, puts the power of Wall Street's secret weapon - AI-powered stock selection - at YOUR fingertips!

Don't miss this limited-time offer.

Subscribe to InvestingPro today and take your investing game to the next level!

Subscribe Today!

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.