Crude oil price forecast ahead of OPEC+ meeting

China, Japan, South Korea, the United States, and the United Kingdom agreed to release supplies from their strategic reserves, but and investors will focus on next week’s meeting of the OPEC+ group.

Supplies from strategic reserves are coming to market

The price of crude oil is advancing this Tuesday even though China, Japan, South Korea, the United States, and the United Kingdom agreed to release supplies from their strategic reserves.

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The U.S. Department of Energy will release 50-million barrels of oil from the U.S. strategic reserve in order to fight against high prices.

The higher oil prices are adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery.

Organization of the Petroleum Exporting Countries announced that the oil demand should increase in 2022 to levels seen before the pandemic, and investors will focus on next week’s meeting of the OPEC+ group.

It is still not clear will the OPEC+ group go ahead with 0.4-million barrels per day of scheduled supply increase while United Arab Emirates Energy Minister Suhail Al-Mazrouei told Reuters he sees no logic in adding more supply. Carsten Fritsch, an analyst from Commerzbank added:

OPEC+ might decide to step up its production to a lesser extent in response to the release of strategic oil reserves in the U.S. and other consumer countries. However, it would need to do so in any case, given the oversupply that is looming next year, so the threat is not particularly credible.

Investors will continue to pay attention to the OPEC+ commentaries looking for any clues, but surging COVID-19 cases could hit demand for crude oil again.

Austria imposed a nationwide lockdown from this Monday, and according to Germany’s Health Minister Jens Spahn, Germany is also not ruling out a new lockdown.

Germany is facing “a national emergency,” and Chancellor Angela Merkel said that the latest surge is worse than anything the country has experienced so far.

The battle against the coronavirus is still not over, and the market could easily become oversupplied, which represents a threat to crude oil prices.

The world’s supply chains crisis also represents a serious problem for the global economy; many big companies reported they had lost sales because of supply problems, which could negatively impact the crude oil price.

$75 represents current support

Those interested in investing in commodities like oil should consider that the risk of another decline is probably not over.

Crude oil continues to trade below $80 resistance, and if the price falls below $75 support, it would be a firm “sell” signal, and the next target could be around $70.

Coronavirus pandemic continues to pose downside risks together with the release of new supplies, but if the price jumps above $80 resistance, the next target could be around $82.

Summary

China, Japan, South Korea, the United States, and the United Kingdom agreed to release supplies from their strategic reserves, but and investors will focus on next week’s meeting of the OPEC+ group. Surging COVID-19 cases could hit demand for crude oil again, and It is still not clear will the OPEC+ group go ahead with 0.4-million barrels per day of scheduled supply increase.