Crude Prices Pop ‘n’ Drop 

We’re seeing plenty of volatility in crude oil at the start of the new week. Crude futures gapped higher at the open, spiking by more than 5% before reversing sharply as European traders hit their desks. The move comes on the back of an announcement from de-facto OPEC leader Saudi Arabia highlighting voluntary plans to slash oil production by a further 1 million barrels per day from July, adding that the cuts have room to be extended. Explaining the move, the Saudi Energy Minister note that the kingdom seeks to create suspense in announcing its action in an attempt to thwart the market anticipating its moves.

Unilateral Saudi Move

Notably, Saudi Arabia’s decision is a unilateral one with no other producers in the group increasing production cuts. In terms of the OPEC allies, Russia made no commitment to further cuts while the UAE secured an increased production quota for 2024. These aspects are likely why the initial move has been faded. Traders are likely judging that the Saudi cut alone will not be enough to materially shift the market while the official OPEC+ production cut level remains as is. A stronger start of the US Dollar this week is also keeping pressure on crude prices currently. Given the focus on the Fed, currently, USD movements look more likely to drive crude prices this week.

Technical Views

Crude

Growing bullish divergence into the latest test of the 65.34 level has seen the market reversing higher. Price has now broken above the 72.61 level and, while above here the focus is on a test of the bearish trend line next. If bulls can clear this area, 82.59 will be the main challenge.