Oil Price Forecast: Firm as Strong Jobs Data, OPEC+ Cuts Ease Recession Fears

Oil Highlights

• Energy sector recovers on strong US job data
• Expectations of supply cuts at upcoming OPEC+ meeting
• Market optimistic about economic recovery

Oil Overview

Oil prices ticked up on Monday, but traders were still being careful even though concerns about a U.S. recession, which caused prices to drop for three weeks in a row – a first since November – have subsided.

At 04:24 GMT, WTI Oil is trading $71.60, up $0.18 or 0.25%. On Friday, the United States Oil Fund ETF (USO) settled at $63.02, up $2.32 or +3.82%.

Oil Prices Recover 4% on Strong US Jobs

Oil prices bounced back after a recovery in energy stocks on Wall Street last Friday. The reason for the recovery was strong job data from the US, which eased concerns of an immediate economic recession, causing a sell-off earlier in the week. US benchmark WTI had plummeted 7.1% due to fears that the US banking crisis would slow down the economy and decrease fuel demand in the world’s largest oil-consuming nation.

Fortunately, a robust US jobs report for April, a weaker dollar, and expectations of supply cuts at the upcoming OPEC+ meeting in June boosted the benchmark by around 4% each on Friday.

Oil Market Looks for Stability Amid OPEC+ Cuts

Oil prices are attempting to find stability as energy traders watch to see if OPEC+ will need to indicate that they are willing to cut production even more. According to a note from Goldman Sachs analysts on Saturday, concerns over near-term demand resulting from strain in the US banking system and a slowdown in the industry, as well as global oversupply due to insufficient compliance with OPEC+ cuts, were “exaggerated.” The investment bank kept its forecast for Brent crude at $95 per barrel by December and $100 by April. Meanwhile, ANZ Research analysts predicted that the market’s attention would shift from economic worries to a decrease in oil supply.

US Inflation Data Release to Impact Markets

On Wednesday, the United States is scheduled to release its consumer price inflation data for April. This report could offer more insight into interest rate changes. It is widely anticipated that the U.S. Federal Reserve will stop increasing rates, and this data could confirm those expectations. Additionally, traders will closely monitor various Chinese economic indicators this week. This includes trade, inflation, lending, and money supply figures for April. This will help market participants evaluate the economic recovery of the world’s second-largest oil consumer. As a result, crude prices may continue to benefit from the upward momentum.

Technical Analysis

Daily WTI Oil traders are trying to establish new higher support a $ 68.49 (S2). If successful, it could drive prices into $72.57 (S1). Since the trend is down, sellers are likely to come in on the first test of this area. Overcoming it, however, could trigger the start of an acceleration to the upside with $78.02 the next potential target.

On the downside, a failure to hold $68.49 (S2) will be a sign of weakness. This could be the trigger point for an acceleration into (S3) at $63.04.

Essentially, the near-term direction will be controlled by trader reaction to $68.49.

Resistance & Support Levels