The price of oil rallied into the end of the week and will look to return to the $85.00 area.
USOIL – Daily Chart
USOIL rallied from $79.00 to $81.36 last week and will look for a push to the $84-85.00 level.
On Friday, OPEC stuck to its policy of cutting crude production, the International Energy Agency (IEA) said. In April, OPEC and its allies, including Russia, pledged to cut output by more than 1.6 million barrels a day into the end of the year as the group seeks to put a floor under prices. The leader of OPEC said this year that $80 per barrel was the line in the sand for their economic plans.
Weakness in oil led to the announcement of additional cuts by Saudi Arabia in July and an extension of OPEC’s targets through the end of 2024. The cuts and higher demand have led to a sharp reduction in reserves, the IEA said in its monthly report.
If OPEC continues its current production targets, oil inventories could drop by 2.2 million barrels per day in the third quarter and by 1.2 million barrels in the fourth quarter, “with a risk of driving prices still higher,” the energy agency wrote.
Oil has found strength while the stock market and economic outlook are weak, which is a good sign for any bounce in stocks and risk assets. The oil price also shrugged off a strong US dollar which has been higher for five consecutive weeks. That marks the longest winning streak in fifteen months.
There is also speculation that China will extend its recent rate cuts or add liquidity to the market after the recent stress in the property sector.
