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Traders remain concerned about the Oil market situation, with certain OPEC members apparently ignoring their production quotas. In July, overall OPEC Oil output reached its highest level in 7 months at 32.87 million barrels per day, a rise of about 173,000 bpd. Most members promised to respect the agreement reached last November after being “called to order” at the previous August OPEC meeting in Abu Dhabi, but there are still growing doubts as to whether these countries can succeed in rebalancing the global Oil market.
Goldman Sachs analysts say they remained “cyclically bullish within a structurally bearish framework”. However, a recent surge in production from Libya and Nigeria will weigh heavily on Oil prices, as these 2 countries were exempt from OPEC’s historic November deal to reduce the overall level of Oil supply. OPEC’s efforts are also being undermined by increased Oil output from U.S. shale producers, which is expected to reach a record high in September.
Although still a far cry from its level in 2014, Oil has rebounded from its low point of February 2016, when prices plummeted to below $26 per barrel. Since then, prices rose sharply before hitting the $55 resistance level and subsequently consolidating between December 2016 and February 2017.
In the short term, traders are monitoring the impact of U.S. Crude Oil supply figures that have recorded an 8th-straight weekly fall. The latest American Petroleum Institute (API) figures reported that U.S. Crude supplies fell 3.6 million barrels for the week ended August 18th. On Wednesday, August 23rd, U.S. commercial inventory figures showed that they had decreased by 3.3 million barrels from the previous week.
Overall, prices are not expected to continue rising above the $60 level, since so far, they cannot even exceed the $55 resistance level due to the continuing oversupply. Since February 2017, prices have been rising sluggishly, forming lower lows and lower highs, which means the buying pressure is not strong enough to push prices higher than previous peak levels.
Stay updated with UFX’s economic calendar, which enables traders to follow significant events such as OPEC meetings and economic growth reports that can impact Oil prices.