Light crude oil has started to trade towards multi-week highs after the world’s top oil exporter Saudi Arabia announced further voluntary output cuts which will be implemented from July.
The kingdom’s output will decline to 9 million barrels per day from around 10 million barrels in May, Saudi’s energy ministry said in a statement at the start of the week causing oil to rally towards $72.00.
Notably, OPEC did not make any changes to oil output, but Saud Arabia did. OPEC+ pumps approximately 40% of the world’s crude and policy decisions can have a significant impact on prices.
Commonwealth Bank of Australia is of the view that Saudi Arabia will extend July’s production cuts if Brent futures remain in the $70 to $75 per barrel range, or even drop below that.
Technically, Crude oil looks vulnerable to more downside unless it starts to anchor above the $72.00 level. Any output decrease from OPEC could get oil prices closer to $75.00. This may in turn cause a cascade of longs to close if they feel OPEC is starting a trend in production increase.
According to the ActivTrader market sentiment tool some 72 percent of traders are bullish towards crude oil, which suggests downside trading in Light Crude oil prices.
Retail traders are typically on the wrong side of the trade and late to the price trend, so we should remain cautious while there is a large majority of retail traders are expecting more upside.
Light Crude Oil short-term Technical Analysis
The lower time frames currently show that Crude oil has formed a large double bottom price pattern on the four-hour time frame, and Crude oil price is starting to look more bullish.
The recent rise has caused a move above the Ichimoku Cloud, but no by signal is currently place. It is worth watching the $73.00 level, which is the 200-period moving average.
Light Crude Oil medium-term Technical Analysis
The daily time frame shows that crude oil has formed a head and shoulder pattern, and this was really the problem for oil prices while the price trades below the $82.00 resistance level.
It should be noted that crude has also fallen back and tested under its 200-day moving average for some time. The Ichimoku Cloud is also showing a bearish outlook for the medium term.
