Crude oil and Brent prices are slightly higher thanks to Asia-Pacific trading ahead of the Organization of the Petroleum Exporting Countries policy meeting. The cartel, along with its allies (known as OPEC+), is expected to increase production, but only marginally. However, these expectations are not shared by a large group of analysts, with some believing that no production increase is in the offing.
A recent decline in factory activity in China, along with other economic indicators that point to slowing global growth amid central bank tightening, have tempered demand expectations. Earlier this week, Reuters reported that OPEC+ had lowered its oil market surplus forecast, reducing the 2022 surplus of 200,000 barrels per day to 800,000 from 1 million barrels per day. A weeks-long decline in crude oil prices ahead of today’s meeting also likely discouraged OPEC members from wanting to increase production, as it would likely drive prices down, eroding member countries’ oil profits.
Additionally, the United States reported higher inventory levels overnight. The American Petroleum Institute (API) reported a buildup of 2.165 million barrels in US crude oil inventories for the week ending July 29. That was above the 629,000 barrel draw expected by analysts. After OPEC, the focus will be on tonight’s inventory report from the US Energy Information Administration report. Traders expect a modest drawdown of 797,000 barrels. A surprise build would likely put pressure on prices.
Crude Oil Technical Outlook
WTI prices are trading slightly higher, but bulls have more work to do if they want to reverse the previous multi-week downtrend. For starters, prices are likely to climb above the declining 20-day simple moving average (SMA), although the MA has capped upward moves since June. Alternatively, prices are likely to fall further if the July low breaks, which is just above the psychological level of 90.