This week is likely to bring a massive drop in oil market prices, although motivated mainly by the unexpected action by the US to release strategic reserves at 1 million brk/d for six months. This, of course, will not offset the entire potential deficit resulting from the lack of oil exports from Russia. Additionally, it is worth noting that the implementation of the OPEC+ agreement to cut oil production reached over 150% in March, meaning that the increased cartel is not producing more, even despite the desire to moderately restore supply.
It is worth noting that we had a big drop in oil prices last fall due to the release of a large amount of reserves from the US. Now this year we have also had a release of some reserves, but the key will be in future actions. Important support for prices is therefore located in the area of 94 USD per barrel. Before that, of course, we have an upward trend line, which results from the expanding wedge, where the price reacted after the declines from the initial phase of March. In addition, we also have the 50-day average, which the market also reacted to in early March. In view of this, a close below the moving average or even below the uptrend line could be a negative signal for oil. Still, the risk regarding lack of supply is considerable. Even before the war in Ukraine, there was speculation of a price of over 100 USD per barrel. U.S. action will mitigate the impact of scarcity, but not eliminate it 100%.
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Source: xStation5
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