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Jakarta, GIC Trade – WTI crude futures jumped as much as 4.6% to about $75 a barrel on Monday before cutting gains to trade below $74, after Saudi Arabia pledged to cut production by 1 million barrels per day from July.
That would bring the country's production level to about 9 million barrels per day next month, the lowest in several years. Energy Minister Prince Abdulaziz bin Salman said he "will do whatever it takes to bring stability to this market" at the highly-staked OPEC+ meeting over the weekend.
Meanwhile, Russia has made no commitments to further reduce production and the United Arab Emirates is allowed to raise production targets for next year.
However, lingering demand concerns, especially from China's top crude importer, continue to weigh on sentiment. The prospect of further interest rate hikes from the US Federal Reserve also clouded the outlook for the commodity market.
In addition, supporting oil prices, namely the recovery of factory activity communicated by IHS Markit through the Caixin Manufacturing PMI, has triggered optimism among investors. Economic data managed to maintain the threshold of 50.0 and landed at 50.9, higher than the consensus and the previous release of 49.5.
Investors should note that China is the world's largest oil importer and higher manufacturing activity in China strengthens the outlook for oil demand.
Fundamentally, the reduction in production to around 9 million barrels per day and the recovery of factory activity in China also supported oil prices further. Then how technically, see the following analysis:
Technical Analysis
Oil prices in the 1-hour period moved further up, trying to break through the resistance area at 73.37 again to the next resistance level at 74.85. Meanwhile, to change the bias to bearish, oil prices need to cross the support level at 72.12 to reach the next resistance level at 71.34.
This analysis is a fundamental and technical view used by the author, not a suggestion or invitation. To get more information click on the image below.
