By Lukman Otunuga Research Analyst, ForexTime
OPEC+ is widely expected to decide to continue its slow-moving normalisation of output levels at its meeting today. Oil experts forecast a supply increase in the region of 500 million barrels per day so anything less than this will see bulls push prices further north to new highs. Attention is clearly focused on what the group do in the near term, although the technical committee has said there is a risk that the global market slips back into surplus when the current deal ends in April next year.
There are several signs of a tight market emerging recently with negotiations over Iran’s nuclear program facing renewed delays, US shale giant Conoco Phillips indicating that the industry is unlikely to raise output significantly and US crude oil inventories tumbling last week to their lowest levels since March 2020. All told, producers appear to remain disciplined and won’t overwhelm OPEC as it brings more supply, even if the Russians especially are keen to ramp up their production levels.
Traders appear to have a “buy on dips” mentality regarding oil, with the long-term uptrend since the March and November lows from last year fully intact. The April 2019 high is the next target for bulls at $75.58 ahead of the big round $80 level.
First day of the second half – King Dollar!
The last day of the first half of the year (where did that go!) saw the mighty dollar regain more lustre as it posted its biggest monthly rise since November 2016. The well-watched DXY is currently trading above its post-Fed highs as traders look towards the defining monthly US jobs report for more confirmation that the US is on the road back to full recovery.
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With the FOMC now keenly watching the data more than ever for it to commence taper talk and dates, several major currencies are at or near their cycle lows. Concerns over the Delta coronavirus variant have also given a bid to safe haven currencies, with flows into the dollar helping push it higher. All eyes will inevitably turn to 12.30 GMT tomorrow and the headline NFP print which is expected to see 700k more jobs created.
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