Oil Price Forecast: OPEC+ Meeting, Debt Talks, Fed Policy Creating Uncertainty

Highlights

• OPEC uncertainty and conflicting messages complicate price predictions.
• Dollar strength and U.S. debt talks influence crude oil market.
• Federal Reserve’s rate hike division affects the probability of price movement.

Overview

WTI crude oil prices are nearly unchanged early Friday. Traders were waiting for clarity on OPEC and its allies’ next moves regarding oil policies. Conflicting messages made it difficult to predict the outcome of the meeting next week.

As of 11:27 GMT, WTI crude oil was slightly up by 9 cents, or 0.1%, reaching $71.92 per barrel. On Thursday, the United States Oil Fund ETF (USO) closed at $64.09.

Oil Prices Drop as OPEC+ Uncertainty Grows

On Thursday, the benchmark settled more than $2 per barrel lower due to Russian Deputy Prime Minister Alexander Novak downplaying the possibility of further production cuts by OPEC+ at the June 4 meeting in Vienna.

Russian President Vladimir Putin stated on Wednesday that energy prices were reaching levels that were economically justified, implying that there might not be an immediate change to the group’s production policy.

These statements contrasted with remarks made by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, who is essentially the leader of OPEC. He warned short sellers to be cautious, leading some investors to interpret this as a signal that OPEC+ could consider additional output cuts.

OPEC News and Debt Talks

In addition to OPEC developments, market observers were also paying attention to the U.S. debt talks. U.S. President Joe Biden and top congressional Republican Kevin McCarthy seemed to be close to reaching a deal to reduce spending and raise the debt ceiling.

Strong US Dollar Dampens Oil Prices

The strength of the U.S. dollar has been keeping a lid on oil prices, as it has been increasing for the fifth consecutive session against major currencies. Despite an aggressive rate hike cycle by the Federal Reserve, U.S. data indicated a resilient economy.

When the dollar strengthens, commodities priced in dollars become more expensive for holders of other currencies, which reduces demand.

Fed Divisions Increase Rate Hike Probability

Recent comments from Federal Reserve officials have shown a division among members regarding whether to continue raising interest rates or not. The probability of a 25 basis point rate hike from the Federal Reserve at its June meeting has increased.

Technical Analysis

WTI Oil is trading on the strong side of $72.57 (S1). This has put the market on a path toward the next upside target at $78.02 (PIVOT).

A sustained move under $72.57 (S1) will indicate that sellers have returned. If this creates enough downside momentum then look for the selling to possibly extend into $68.49 (S2) over the near-term.

Resistance & Support Levels

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