Breakdown of the latest developments on the global exchanges
Jul 2, 2021, 10:54 AM GMT

The Price of Crude Oil Rallies on Renewed OPEC Optimism

Pumpjack on sunset background. A pumpjack is the overground drive for a reciprocating piston pump in an oil well

The energy market is driven by heightened demand that appears impervious even to inflation concerns. Check out our detailed analysis of the price of crude oil to understand more about this bullish market.

The highly anticipated 181st Meeting of the OPEC Conference has bolstered the underlying rally in the energy market owing to newly expressed projections for solid demand by the end of the year. This OPEC optimism is driving crude oil towards new multi-year highs.

The price of crude oil continues to rally following OPEC's optimism. It could be a time for a bearish correction

Prior to the commencement of the meeting, the price of crude oil was temporarily consolidating in a narrow range. However, the beginning of the videoconference catalysed a new upswing. It can be seen on the hourly chart above.

The price was able to break out above the major resistance level at 74.00 on its third attempt. Afterwards, it went on to 76.20 before developing an Evening Star pattern. The latter typically entails mounting bearish pressure, which could lead to the establishment of a new bearish correction.

A rebound from the 38.2 per cent Fibonacci retracement level at 74.58 was then followed by a failed retest of the 23.6 per cent Fibonacci at 75.19. If the price of crude oil manages to reverse from the latter yet again, it could then probe the former for a second time.

A potential breakdown below 74.58 would also signify a break in the ascending channel, underpinning such a new correction. Notice that the significance of the channel's lower boundary is underlined by the fact that it is currently converging with the 50-day MA (in green).

A correction could then ensue, potentially falling to either the resistance-turned-support at 74.00 or the 61.8 per cent Fibonacci at 73.58. These two levels underscore the support area in which bulls are likely to resume placing their long orders.

OPEC's Demand Optimism

During yesterday's opening day of the conference, OPEC adopted a distinctly hawkish tone, which was the catalyst for the aforementioned upswing:

"The outlook for worldwide oil demand is also moving in the right direction and is now on course to grow by 6 mb/d in 2021, after its turbulent 9.3 mb/d decline last year. The latest OPEC Monthly Oil Market Report projects a strong rebound of oil demand in the second half of the year, putting us within striking distance of pre-pandemic levels in the fourth quarter."

The robust demand in the energy market is being observed by major international policymakers, as it looks quite independent of the transitionary inflation pressures.