Oil hovers below $78 as OPEC looks set to maintain current output cuts

• Oil flirts with a third consecutive decline ahead of Sunday’s OPEC+ meeting on Sunday. 
• OPEC+ will convene online to decide on production cuts, with most analysts expecting current cuts to extend into 2025. 
• The US Dollar Index trades just below 105.00 ahead of closing a volatile week driven by bonds and macroeconomic data. 

Oil prices are hovering below $78 on Friday, failing to recover from the near 3% decline in just two trading days. For the week, Crude’s performance is broadly flat and could still eke out a gain ahead of the OPEC+ meeting, which will take place on Sunday. The biggest headline ahead of the meeting is that possibly the current production cuts in place might be prolonged even into 2025, as a measure to keep Oil prices near $80.

Meanwhile, the US Dollar Index (DXY) has had a volatile week and is trading just below 105.00. The Greenback roared on Wednesday, when bond traders pushed yields higher across the board during some chunky US sovereign debt bond auctions by demanding a higher yield for the offered debt issuances. However, the move got erased on Thursday with both softer US housing data and the Gross Domestic Product data release. On Friday, the US Personal Consumption Expenditure (PCE) Price Index report might be the judge that decides if the DXY closes above or below 105.00 this week. 

At the time of writing, Crude Oil (WTI) trades at $77.60 and Brent Crude at $81.79

Oil news and market movers: OPEC+ headlines buzzing

• OPEC+ meeting on Sunday will be an online meeting. Here are some key takeaways ahead of the meeting:
  • Iran, Libya and Venezuela are exempt from production cuts because their output is constrained by external factors such as sanctions or war. 
  • Both Bloomberg and Reuters have reported plans to keep production cuts in place heading into 2025, according to sources close to the matter.
  • United Arab Emirates and Kazakhstan are set to jack up their production in the near future with new installations and production sites set to come online. 
• Traders keep pointing to the uncertain US economic outlook with an unclear monetary policy ahead, while the US housing market is showing signs of a cooldown.
• This Friday closes off with the weekly Baker Hughes Oil Rig Count data at 17:00 GMT. The previous number was a count of 497.

Oil Technical Analysis: What else can be done

Oil prices are showing again their sensitive side, while traders clearly see no confirmation of a pickup in demand on the horizon soon. The Fed has been clearly saying these past two weeks that chances of an initial rate cut for 2024 starts to look bleak. Not much OPEC+ can do against that, and prolonging production cuts into 2025 couldn’t be enough to order the deficit between current supply levels and the sluggish demand outlook. 

First, the Simple Moving Averages (SMA) need to be regained under control. The 100-day SMA at $79.05 and the 200-day SMA at $79.56 are the first levels on the upside. Next, the 55-day Simple Moving Average (SMA) at $81.22 and the descending trendline at $81.75 are an area with a lot of resistance where any recovery rally could pause. Once broken through there, the road looks quite open to head to $87.12. 

On the downside, the $76.00 marker is coming back into focus with the $75.27 level playing a crucial role if traders still want to have an option to head back to $80.00. Should that $75.27 pivotal level snap, expect to see a risk-full nosedive move that could sprint all the way down to $68, below $70.00.

US WTI Crude Oil: Daily Chart