Crude oil price has been on a bull run since late August. Investors are keen on the OPEC+ meeting in the new week for further cues.
With the ongoing bull run in the oil market, the forecasted $100 per barrel is increasingly becoming valid. Nonetheless, the back largely stops with the Organization of Petroleum Exporting Countries (OPEC) and its allies.
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The first time that crude oil price hit the psychological level of $100 was in 2008. Interestingly, OPEC’s decision to lower production in the preceding years was largely responsible for the surge. Between 2004 and 2007, the alliance had only increased its output by 1.2 million bpd. In comparison, global oil demand rose by 3.2 million bpd during that timeframe.
Over the years, the coalition has been using output to control prices. Currently, it is on a gradual hike in output as global oil demand recovers from the coronavirus pandemic. Notably, it has maintained its production cuts despite calls from the US government and other key consumers to increase production as a way of dealing with the soaring crude oil price.
According to the OPEC+ Joint Technical Committee, there are no major changes in the demand/supply outlook. As such, analysts expect the alliance to continue its plan of an additional 400,000 bpd in December. A confirmation of the plan will likely boost the commodity’s price closer to the forecasted level of $100 per barrel.
Crude oil price outlook
Since late August, the benchmark for global oil – Brent futures – have been in the green for 8 out of 10 weeks. During that timeframe, it has surged by about 29.55% from a low of 64.68. Notably, it has remained above the crucial level of 80 since rising past it in early October.
Brent oil ended Friday’s session down by 1.04% at 83.62. Earlier in the week, it hit a three-year high at 86.83 before pulling back to the week’s low of 82.37.
On a daily chart, crude oil price is trading above the 25 and 50-day exponential moving averages. In the new week, I expect the commodity to make rather subtle price movements as investors await further cues from the OPEC meeting.
In the ensuing sessions, Brent futures will likely remain above the crucial support level of 80. Subsequently, it may end up within a horizontal channel of between the past week’s high of 86.83 and along the 25-day EMA at 82.37. If OPEC decides to maintain output cuts, the bulls may manage to push the resistance level to October 2014’s high of 88.05.
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