Quick overview
- Geopolitical tensions have eased, leading to increased global oil production and downward pressure on crude prices.
- West Texas Intermediate crude oil is currently priced at approximately $74.19 per barrel, with traders monitoring supply implications from the recent US-Iran Peace Agreement.
- Iranian oil exports are returning to the market, contributing to a well-supplied environment alongside OPEC+ production increases.
- Technical analysis indicates that $74.19 is a critical support level, with potential upside targets at $78.07 and $82.24, while a close below $72.50 could signal further declines.
Geopolitical tensions have abated, and worldwide production is climbing, which is exerting pressure on the value of crude. West Texas Intermediate crude oil is at roughly $74.19 per barrel as traders consider supply implications for the US-Iran Peace Agreement signed last month.
As a war-related supply premium in the price recedes, traders will be focusing on increasing production, inventory levels, and technical support for the next move.
The price action of the overall downtrend may continue as Iranian oil exports return, OPEC+ production increases, and the dollar is strengthening. If WTI finds buyers below the current support, the price action may improve.
Iranian oil exports return and continue to weigh on prices
A factor weighing on crude oil in recent weeks has been the recent signing of the Islamabad Memorandum of Understanding (US-Iran MoU) on June 19. This has reduced geopolitical tensions related to a supply crunch in the Middle East and eased restrictions on Iranian exports of oil.
As restrictions on shipping tankers are loosened and restrictions are lifted, Iran’s tanker exports from the Strait of Hormuz will resume. Iranian oil exports are supported by US waivers on banks, insurance, and logistics and will continue to ramp up. Iranian oil that was offline as a result of sanctions has returned, and now Iranian oil is in the market once again.
While the market was supported by buyers who feared an oil shortage, there are now additional cargoes of oil that will reach buyers worldwide. The easing of war risk has increased the likelihood of the price coming under pressure.
In the meantime, OPEC + is following the program of a production increase of around 188,000 barrels per day of oil to be implemented in July, following the end of voluntary production reductions made outside that quota. Non-OPEC + oil producers, notably the United States, Brazil, Guyana, and Canada, continue to increase production, and the market is well supplied.
Meanwhile, the rise in oil demand has been relatively limited, with both OPEC and the International Energy Agency forecasting oil demand growth of around 1.2 million barrels per day globally in 2024, driven by sluggish economic growth and higher energy efficiency. In addition, the continued support from the dollar has been a limiting factor for crude prices.
A stronger US currency, expected due to high interest rates to persist at higher levels longer than markets anticipated, will limit upside for WTI as it makes oil more expensive for buyers to purchase in dollars and speculative activity to drop.
WTI Crude Oil (USOIL) Technical Analysis: $74.19 is the Critical Level
WTI oil is still technically trading above the upward sloping trend line that started to develop from the February lows of around $55. In this area, around $74.19, we find strong demand for the commodity where selling has been absorbed.
Although this support is there, bulls will still be fighting to move price up to the level of $78.07 to $78.48, which includes the 200 exponential moving average (EMA). It has been the last price range to block off rallies so far. This will continue to be the next level to watch, as there is not much upside above there at this stage.
The Relative Strength Index (RSI) remains at 41.9, indicating neutral conditions that could allow for further recovery in price. It’s not indicating that the price has bottomed, but it’s not showing the selling that we’ve seen so far either. It is likely that the RSI will continue to rise, as demand picks up and the MACD histogram stabilizes.
A daily close above $78.07 would improve the technical structure in the near term, and could lead to $82.24. A daily close below $72.50, however, would have more bears on the market, leading to downside in the near term to $69.90.
WTI Crude Oil (USOIL) Forecast
WTI oil has been shifting from a market dictated by geopolitical developments into a fundamentals focused market, where Iranian exports have returned, major producing countries are continuing production growth, and the U.S. dollar remains firm.
These supply developments are keeping price from rising beyond the levels discussed above. It has been a solid rally from the February lows, but the upside is still limited.
So far, $74.19 has been a good level for demand. $78.07 remains the next level to watch for any potential upside, or even $82.24 in the coming days. A close below $72.50 would be the first sign that the sellers have regained control, potentially leading to the next downside target of $69.90.
Arslan Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.
His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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