Oil fails to rebound despite OPEC+ decision to extend production cuts into 2025

• Oil steadies near $77.00, looking for direction after Sunday’s OPEC+ meeting. 
• OPEC+ meeting sets the tone for more downside after the summer season despite the decision to extend production cuts. 
• The US Dollar Index trades at mid-104.00 levels and is facing a heavy week full of economic data.

Oil prices trade broadly steady on Monday, ignoring the OPEC+ decision to extend current production cuts into 2025 with the goal to support prices.  Despite the broad commitment to keep a tight supply, some Oil producers within the organization will be able to ease some of the voluntary production cuts, which came as a surprise.  The biggest winner was the United Arab Emirates, which can head back to markets and sell more barrels. Overall, Saudi Arabia and Russia will still take the bulk part of the effort and maintain that 2 million barrel draw per day, phasing it out from October. 

Meanwhile, the US Dollar Index (DXY) is floating around a steady level near 104.63 with markets bracing for a very busy week. Several important data points are set to be released throughout the week in the run-up to the main event on Friday: the US Employment Report. Traders will be looking for clues over whether the US economy has topped out.

At the time of writing, Crude Oil (WTI) trades at $77.08 and Brent Crude at $81.33.

Oil news and market movers: OPEC+ fizzled again

• OPEC+ agreed to extend the cuts of 3.66 million barrels per day by a year until the end of 2025. However, voluntary production cuts, currently at around 2 million barrels per day, will start to be phased out from October after the recent OPEC+ production quota decision, Bloomberg reports.
• Goldman Sachs managing director and head of research Daan Struyven said in a note that the outcome of the OPEC+ meeting is bearish due to the decision to return supply to markets despite the recent surprise increase in inventories. Risks for Oil prices are now skewed to the downside, Bloomberg reports.
• Warren Patterson, head of commodity strategies at ING, sees a possible uptick in crude prices over the summer period. Still, the deficit is expected to widen by the third quarter.

Oil Technical Analysis: Doubling down on Fed cuts

Oil prices are not feeling warm about the recent agreement on output from OPEC+. Despite several bearish headlines from analysts and traders, there might be the consideration that OPEC+ expects a pickup in demand will take place by 2025. After all, sooner or later, the US Federal Reserve will cut interest rates, and it looks like OPEC+ is starting to prepare for this scenario. 

First, the Simple Moving Averages (SMA) need to be regained under control. The 100-day SMA at $79.09 and the 200-day SMA at $79.54 are the first levels on the upside. 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. 

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