A rebound in Crude Oil prices is on the horizon.Since the beginning of the month, there have been signs that crude oil has been falling and this has continued into today's Asian opening at a total of -9.11%. OPEC+ (OPEC with Russia and its allies) wanted to impress the market by extending the mandatory cuts, but the market has turned its attention to the voluntary cuts. The reversal of these cuts has set off a chain of unparalleled bearish movements that have pushed the value of Brent crude from its recent highs of $84.66 to a low of $76.71 a barrel. It is clear that this weekend's meeting was aimed at giving an image of solidity, prolonging, as we said, these cuts and showing a certain unanimity. But Monday's 4% drop on Monday has continued to generate a “Technical Abyss”. Both West Texas and Brent are close to this year's lows.
The market reaction has clearly been depressing for any oil producer, and this will obviously help consumers to rejoice. After such a contrary outcome, it would be foreseeable that they will gradually reverse the voluntary cuts, at least looking ahead to October of this year since they started the cuts in November of last year. If we look at it in aggregate terms, what OPEC+ has done is to start opening the taps and estimates indicate that by 2025 Russia and the United Arab Emirates will be producing 100,000 barrels more than at present, and Saudi Arabia will be producing around 500,000 barrels more.
Surprisingly, inventories have surprised expectations on the upside and there are now downside risks to the $75 to $90 range for Brent according to analysts at Goldman Sachs. The same has occurred in other commodities, which have fallen around 1%, as is the case of copper and iron, and only aluminum and copper saved the session in positive territory. The latter has experienced an intense plunge of 8% since it reached its highs.
If we look at the chart, yesterday's and today's downward movement has closed a price movement that began in February. Now we will have to see if this movement continues, but the RSI is marking 15.02% oversold, which could be marking a possible correction to the $82 area.
Ion Jauregui - ActivTrades Analyst
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