In case you missed it, OPEC and its major oil-producing friends started the week by announcing surprise production cut plans starting May.
The cuts are expected to take out around 1.16 million barrels per day (bpd) worth of supply on top of the 2 million bpd cut announced back in October.
Not surprisingly, crude oil prices including Brent crude oil shot higher yesterday.
Brent Crude Oil (UKOIL): 4-hour
UKOIL opened with a gap from Friday’s $80 closing prices to its $83.50 open price on Monday.
Coincidentally, that’s above the 100 daily SMA resistance that hasn’t been broken since prices were above $110 in July 2022.
How high can oil prices fly?
Optimism over the summer driving season and China’s reopening prospects could give momentum to UKOIL’s upswing.
The benchmark index could reach the $89.00 previous high or the $90.00 psychological handle near the 200 daily SMA before seeing sustained selling pressure.
On the other hand, traders could focus on the impact of higher oil prices on the markets.
Higher prices would fuel inflation and maybe force major central banks – who were already considering pausing their tightening cycles – to raise interest rates some more. This could affect business and consumer activity and eventually weigh on risk sentiment crude oil demand.
Focus on interest rate and global growth concerns could bump UKOIL down from the resistance zone.
Look for consistent trading below the 100 SMA, Stochastic leaving its overbought levels, or bearish momentum for short opportunities all the way to the $82.00 or $80.50 previous areas of interest.
