Oil is pulling back today following reports from Financial Times and Reuters. Financial Times reported that Saudi Arabia is ready to increase its oil output in order to offset reduction in Russian output due to sanctions. A Reuters report surfaced later on saying that the United Arab Emirates is also willing to help to offset lower production in Russia. Russia is currently producing around 1 million barrels per day below an agreed quota. Reuters sources said that Russia may agree for other OPEC+ members to take its share of the quota but such a measure is likely to be phased in gradually. As such, the cartel is likely to stick to its current output increase policy at today's meeting and not announce a major change to quotas. However, a signal may be sent that discussions over such measures are ongoing.
Taking a look at OIL chart at H1 interval, we can see that an overnight drop was halted at 200-hour moving average (purple line) and price recovered above price zone marked with 38.2% retracement of the upward move launched in the first half of May. This is an important price zone as, apart from the aforementioned moving average and retracement, the short-term upward trendline can be found in the area. In case bulls fail to hold the price above it and we see a downside breakout, a pullback may deepen towards the support zone in the $111.10 area, marked with 50% retracement and lower limit of a market geometry.
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Source: xStation5
