OPEC and oil bears battle over price direction as production cuts persist

US crude clears important resistance.

US crude cleared the all-important 50-DMA yesterday. The barrel of US crude trades a touch below the $72bp level this morning. The next important resistance is seen near $73.50, where stands the 100-DMA.

There is a big fight going on between OPEC – who is ready to do anything to push oil prices above $80pb, and the oil bears, who aggressively fight OPEC and sell any price peak that follows an OPEC-led rally. But the persistent production cuts will at some point become a fundamental problem. And the longer the bears fight OPEC and the more OPEC cuts production, the more severe the impact on global oil glut, and the higher the risk of a decent jump in oil prices.

Yet another rally in energy prices would again interfere with the central banks' fight against inflation and get them to further tighten their policies. And that would apply further pressure on global economy and on asset prices.

A soothing argument is that energy prices cannot rally infinitely when the world is so sensitive to inflation because recession worries will rapidly wane the energy rally and settle the prices at reasonable levels. So even with the most optimistic scenario for oil, there is little chance we see oil prices spike above $90pb. Maybe we could get to the $80bp that will make Saudis happy, though.

Ipek Ozkardeskaya

Ipek Ozkardeskaya provides market analysis on FX, leading market indices, individual stocks, oil, commodities, bonds and interest rates.

She has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist in Swissquote Bank. She worked as Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

She is passionate about the interaction between the economy and financial markets. She has been observing and analyzing a wide variety of relationships between the economic fundamentals and market behaviour over the past decade. She has been privileged to live and to work in the world's most exciting financial hubs including Geneva, London and Shanghai.

She has a Bachelor's Degree in Economics and a Master's Degree in Financial Engineering and Risk Management from the University of Lausanne (HEC Lausanne), Switzerland.