Crude Oil News Today: Underpinned by OPEC+ Cuts, Capped by China Headwinds

Oil Prices Surge Amid Supply Deficit Forecasts and OPEC+ Cuts

Oil prices climbed on Monday, driven by forecasts of a supply deficit due to peak summer fuel consumption and extended OPEC+ production cuts. However, gains were tempered by global economic challenges and increased non-OPEC+ output.

OPEC+ Influence on Oil Prices

Both Brent and WTI contracts saw significant gains in June, with Brent consistently settling above $85 per barrel. The Organization of the Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, have extended their deep oil output cuts into 2025. This extension is expected to create supply deficits in the third quarter as summer demand for transportation and air-conditioning fuels depletes stockpiles.

EIA Report Supports Price Rally

The Energy Information Administration (EIA) reported a four-month high in oil production and demand for major products in April. This surge has provided additional support for oil prices. Analysts maintain a positive outlook on Brent despite concerns about U.S. gasoline demand and Chinese apparent demand.

Mixed Signals from China

China’s role as the world’s second-largest consumer and top crude importer remains critical. Recent data shows a mixed economic picture: smaller Chinese manufacturers experienced the fastest factory activity growth since 2021 due to overseas orders. Conversely, broader surveys indicated weak domestic demand and trade frictions causing another industrial sector contraction. This discrepancy raises questions about the accuracy of official figures versus actual industrial activity.

Geopolitical Tensions and Rate Cut Hopes

Geopolitical concerns in Europe and tensions between Israel and Lebanon’s Hezbollah are keeping a floor under oil prices. Additionally, traders are hopeful for an interest rate cut by the U.S. Federal Reserve. If WTI prices stay above the 200-day moving average at $79.52, the recent rally could extend towards $85 per barrel.

Hurricane Season’s Impact

The start of the Atlantic hurricane season, marked by Hurricane Beryl, poses a potential threat to oil and gas production and consumption in the Americas. This earliest recorded Category 4 hurricane could bring life-threatening conditions to the Caribbean’s Windward Islands.

Market Forecast: Bullish Outlook

Given the combination of anticipated supply deficits from OPEC+ cuts, peak seasonal demand, and geopolitical tensions, the short-term outlook for oil prices is bullish. Despite economic headwinds and mixed signals from China, the market is expected to see continued upward pressure on prices, with potential further gains if supportive factors persist.

Technical Analysis

Light crude oil futures may be higher on Monday, but they remain inside the previous session’s range, indicating investor indecision and impending volatility.

Bullish traders are hoping for strong enough upside momentum to fuel a new-term rally into at least $83.57.

On the downside, a Fibonacci level at $80.83 is the nearest support, followed by a price cluster at $79.16 to $78.79. The latter is the 50-day moving average, which is controlling the intermediate trend. Longer-term, the market remains well-supported by the 200-day moving average at $77.70.