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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.

Source: Bloomberg

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

Source: TradingView

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