Oil prices demonstrated some profit-taking after a surge to $92, and traders may be taking a break from bullish activity at this level.
USOil: Daily Chart
Crude oil prices rose again last week, surpassing the $90 per barrel mark. The daily chart shows support around $87 per barrel.
The Saudi Arabian energy minister, Prince Abdulaziz bin Salman, defended the latest decision to extend production cuts, stating that the “jury is still out” on a global economic recovery.
Ironically, the recent increase in oil prices is a key factor in the shaky global economic recovery. Riyadh and Moscow announced earlier this month that they would extend their production cuts until the end of the year, pushing crude oil prices to 10-month highs.
Saudi Energy Minister Prince Abdulaziz bin Salman told oil and gas industry leaders in Calgary that the decision was not about “jacking up prices” but rather about “making the right decisions when we have the data.”
Market analyst Ed Yardeni has now raised the probability of a recession in the United States before the end of 2024, citing higher oil prices and widening deficits. In July, Yardeni lowered the likelihood of a recession, but the 30% spike in oil prices since late June has changed his mind.
“Today, in response to several new developments, we are raising the odds of a recession before the end of next year from 15% to 25%,” he wrote on Monday.
The current correction in oil on Monday may just be a short-term pause, with the support lying at $87. The United States will also have to decide on its SPR oil reserves, which were depleted after President Biden sold 180 million barrels from the stockpile. Saudi Arabia was angered last year that the US was not going to be topping up the reserves due to maintenance, and they missed out on prices at $65-70, which may be a mistake if oil pushes above $100 again.