The rally in oil prices found resistance at the $82.50 level due to the higher US dollar.
USOIL – Daily Chart
The dollar was higher by 0.50% from recent lows, which dragged oil lower by over 2% on Monday. The $82.50 is now vital to further gains in the price of crude oil.
The price of oil surges after OPEC+ announced a production cut to take effect in May.
Signs of weakness in global diesel demand also hint at an economic slowdown that would be bearish for crude oil prices. According to data from China’s Ministry of Transport, the number of trucks running on Chinese highways dropped -8% for the week ended April 9. Also, US diesel demand is also set to level -2% this year, according to S&P Global, which would be the most significant drop in US diesel demand in 7 years without the pandemic year.
An ongoing halt of Iraqi crude exports from the Turkish port of Ceyhan is adding tightness to global oil supplies. The Turkish government wants to negotiate a $1.5 billion settlement it was ordered to pay before allowing Iraqi crude exports to resume through the pipeline. Oil exports of 400,000 bpd from the Turkish port of Ceyhan have been stopped since March 25 after Iraq won an arbitration case from the International Chamber of Commerce.
Crude Oil Forecast
The OPEC+ announced a surprise production cut of more than 1 million bpd which starts May 1. Saudi Arabia said the cuts were a “precautionary measure”, while March crude production fell by 80,000 bpd. The US EIA said last week that crude oil inventories were 2.8% above the seasonal 5-year average, while gasoline was -6.9% below the seasonal 5-year average.
It was also thought that OPEC had stopped production after news emerged that the US would not fill its stockpiles for the rest of the year.
