Oil pares losses after steep correction amidst unhappy OPEC+

• Oil steadies near $74.00 after a sizeable decline in the first part of the week. 
• OPEC+ pushes against the bearish outlook, warning about the possibility of unwinding the taper of voluntary cuts. 
• The US Dollar Index trades just above 104.00 as ECB decision looms. 

Oil prices are in repair mode on Thursday after a near 10% decline in just five trading days. The sharp downside move came after the OPEC+ meeting did not hold any measure to further support prices at or around $80.00. With markets disappointed, several central banks added fuel to the fire by suggesting that an aggressive cutting cycle might not take place as disinflation is going too slow. The sell-off in the past days has prompted a response from OPEC+, which said that the organization is ready to do more to support prices when needed. 

Meanwhile, the US Dollar Index (DXY) is hovering just above 104.00 after Monday’s downbeat economic data pushed the Greenback to the lower end of the 104.00-105.00 range. With the European Central Bank (ECB) interest-rate decision on the docket for this Thursday and the US Employment Report on Friday, the DXY might be trading in a new range by the closing bell at the end of the week. 

At the time of writing, Crude Oil (WTI) trades at $74.23 and Brent Crude at $78.60

Oil news and market movers: OPEC+ lashes out

• Saudi Energy Minister Prince Abdulaziz bin Salman reiterated that the OPEC agreement from Sunday, like every other OPEC+ deal, retains the option to pause or reverse production changes if necessary, Bloomberg reported.
• Citigroup upgraded its outlook forecast on the back of comments from OPEC+, forecasting that the organization might extend their output caps towards the end of the first half of 2025.
• The Citigroup report also forecasts that Oil prices might fall to $70 in 2H 2024 and to $60 per barrel  in 2025 if OPEC does not change its production levels. 
• Some help for Oil prices could come as US Federal Reserve Funds futures pricing data projects a rate cut in September. Lower interest rates could spark demand for Oil again, Reuters reports. 

Oil Technical Analysis: OPEC+ is not the Fed or ECB

Oil prices are still depressed following their near 10% slide lower. The decline is driven by the fact thatOPEC+ is unable and reluctant to take more measures to limit production. It looks increasingly clear that Oil demand will largely depend on what big central banks do as an interest-rate cut cycle wouldspark an economic rally, which will support Oil demand. 

Looking up, the pivotal level near $75.27 needs to be recovered first before aiming for the key Simple 100-day and 200-day Simple Moving Averages (SMA) at $79.09 and $79.42, respectively. Next, the 55-day Simple Moving Average (SMA) at $81.13 and the descending trendline at $81.45 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. 

The $76.00 marker is now a resistance with the $75.27 level playing a crucial role if traders still want to have an option to head back to $80.00. Risks are skewed towards another leg lower, all the way down to $68.00, below $70.00.

US WTI Crude Oil: Daily Chart