WTI oil rose to the resistance level of $74.5 per barrel.
The dynamics of quotations was quite calm, as market participants were waiting for the results of the OPEC meeting. Nevertheless, the ministers of the alliance countries could not agree on the future of the deal on Friday and decided to continue negotiations on Monday. The meeting reached an impasse over the issue of extending the agreement on limiting oil production until the end of 2022 and the position of the UAE on this issue. Emirati representatives insisted on raising their base production level, from which restrictions are considered, by almost 700,000 barrels per day if a decision is made to extend the deal. Now the deal is valid until the end of April 2022.
At the same time, the main option, which was discussed from August to December of this year, was to continue the growth of the alliance's production by 400,000 barrels per day per month. Recall that OPEC, due to the drop in oil demand caused by the pandemic, has reduced its production by 9.7 million barrels per day since May last year. As the situation stabilized, the restrictions were adjusted, and as of July 2021, they amount to 5.76 million barrels per day. The decision for Saudi Arabia and Russia will not be easy. In addition to the UAE, Iraq, Kazakhstan, Nigeria and other countries may ask for an increase in quotas. Therefore, agreeing to the requirements of one participant can theoretically lead to a cascade of requests and a deterioration of the mood in the organization. Theoretically, the ideal outcome for the oil market would be partial concessions for the UAE without fulfilling their requirements completely. At this meeting, OPEC+ plans to sign an agreement on monthly monitoring of the market on an ongoing basis in 2022.
Oil prices may slide below current levels if OPEC+ does not reach a consensus on the parameters of the deal after July. The market takes into account the growth of demand at current prices, which means that if the countries do not agree on a reduction in quotas, there may be a significant increase in prices at the moment in the market. After such failures, as a rule, countries begin to increase production uncontrollably, which subsequently leads to a decrease in prices. In this case, we can expect another rally to $ 80 per barrel with a further fall below the current levels.
According to the results of the first half of the year, Brent crude oil rose by 44.2%, and WTI - by 51.5%. In the second quarter, prices showed an increase of 17.5% for Brent and 24.2% for WTI. In April-June, market participants evaluated reports on oil reserves and demand in the context of uncertainty around the coronavirus situation and paid attention to the actions of OPEC+, which sought to maintain the balance in the market. Strong data from Europe, the United States and China supported hopes that the global economy is recovering, and this will contribute to the growth of oil demand in the future. The situation was complicated by reports that the United States may ease sanctions on Iran, and this may lead to an additional influx of oil to the market. However, negotiations on the nuclear deal with Iran are still ongoing, so it is difficult to assess the extent of the final impact of this factor on the quotes.
WTI: trading signals for the week of July 5-11, 2021
In our forecast for the coming week, we expect an increase in the price of WTI oil to the levels of 74.7, 75, 75.3, 75.8 and 76 dollars per barrel.