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Sentiment Shifts Ahead of OPEC+ Meeting

Oil futures experienced a downturn on Tuesday, marking a stark contrast to the considerable gains observed in the previous two sessions.

This shift in market behavior is largely attributed to investors adopting a cautious stance in anticipation of the upcoming OPEC+ meeting scheduled for Sunday. There is widespread speculation that the meeting could pivot towards discussions on intensifying supply cuts.

Price Movements and Monday’s Surge

At 07:00 GMT, Brent crude futures are trading $81.68, down $0.64 or -0.08%,  U.S. West Texas Intermediate crude futures are at $77.21, down $0.62 or -0.08%.

This decline follows a notable surge on Monday, where both contracts rose approximately 2%, spurred by reports from OPEC+ sources indicating potential deliberations over additional oil supply reductions.

Investor Sentiment and OPEC+ Strategies

Tuesday’s market response was characterized by a wait-and-see approach from investors, eager for confirmation of OPEC+’s actual decision. Analysts are predicting that OPEC+ might not only extend but potentially deepen oil supply cuts into the upcoming year.

The focus is particularly on whether Saudi Arabia will request other members to share the burden of these adjustments. However, reopening quota agreements from June could invite complex negotiations, leading some to expect more voluntary adjustments from individual producers.

Global Influences and Future Outlook

Oil prices have seen about a 16% drop since late September, influenced by sustained crude output in the U.S. and concerns over demand growth, notably from China, the world’s largest oil importer.

Market watchers are also mindful of potential demand impacts from a forecasted U.S. recession in 2024 and recent warnings of potential deflation from major U.S. retailers.

Additionally, upcoming reports on U.S. crude and gasoline stockpiles, due later this week, are expected to shed further light on the market dynamics.

Short-Term Forecast

Given the current market conditions and the anticipation surrounding the OPEC+ meeting, the short-term forecast for oil futures appears bearish.

Investors and traders are likely to continue monitoring global economic indicators and OPEC+’s decision-making closely, which will significantly influence market trends in the coming days.

Technical Analysis

Daily Light Crude Oil Futures
The light crude oil futures are currently trading below both the 200-day and 50-day moving averages, suggesting a bearish sentiment in the short to medium term.

The current price is slightly below the previous day’s close, indicating a minor negative shift in momentum. While the price is just below the minor resistance level, it’s significantly above the main and minor support levels.

This positioning, particularly its distance from the key moving averages, primarily reflects a bearish outlook. However, the proximity to the minor resistance suggests potential for a near-term upward movement if this level is breached. ​

Based on the early price action, trader reaction to the 200-day moving average at 78.16 is likely to set the tone for the day.

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