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Crude oil prices: EIA inventory to shift into focus after OPEC announcement

WTI and Brent Crude oil prices see modest increase ahead of today’s OPEC meeting; focus to shift to the EIA’s weekly inventory report after API post surprise build and prices remain biased to the downside.

Crude and Brent oil prices are modestly higher through Asia-Pacific trading ahead of the Organization of the Petroleum Exporting Countries’ policy meeting. The cartel, along with its allies (known as OPEC+), is expected to boost output, but only marginally. However, those expectations are not shared among a large group of analysts, with some believing that no production hike is coming.

A recent drop in factory activity in China, as well as other economic indicators that point to a slowdown in global growth amid central bank tightening, have tempered demand expectations. Earlier this week, Reuters reported that OPEC+ lowered its oil market surplus forecast, trimming the 2022 surplus by 200k barrels per day to 800k from 1 million barrels per day. A multi-week drop in crude oil prices leading up to today’s meeting has also likely discouraged OPEC members from wanting to boost production, as that would likely push prices lower, eating into member nations’ oil profits.

Moreover, the United States reported higher inventory levels overnight. The American Petroleum Institute (API) reported a 2.165 million barrel build in US crude oil stocks for the week ending July 29. That was above the 629k barrel draw that analysts expected. After OPEC, the focus will shift to tonight’s inventory report from the US Energy Information Administration’s report. Traders expect a modest draw of 797k barrels. A surprise build would likely pressure prices.

Crude oil technical outlook

WTI prices are trading slightly higher but bulls have more work to put in if they want to reverse the preceding multi-week downtrend. To start, prices would have to climb above the falling 20-day Simple Moving Average (SMA), although the MA has capped upside moves going back to June. Alternatively, prices risk falling further if the July low breaks, which is just above the 90 psychological level.

Crude oil daily chart

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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