OPEC news has suppressed the rise in oil prices. Will WTI fall to $55 by the end of September?

On Wednesday (September 3), oil prices came under pressure. Bloomberg reported that OPEC + plans to raise production quotas again at its next meeting, causing oil prices to fall by more than 2%. Last month, OPEC lifted all additional restrictions imposed by major producers such as Saudi Arabia, Russia and Kazakhstan.

(With Wednesday's reversal, oil prices confirmed resistance at the 200-day moving average, Image Source: Internet)

The new move is a public display of a battle for market share rather than an attempt to prop up prices. First, it is a fight against the US, which is aggressively promoting its energy through policy, imposing sanctions on oil-producing countries and including oil and gas purchases in trade deals.

If the price cut is indeed confirmed, it would be an impressive quote pressure factor, reversing the trend of rising prices in previous weeks.

Earlier, the decrease in U.S. commercial inventories due to the signal of a September interest rate cut, as well as the recovery of risk appetite in the stock market, supported oil prices.

With Wednesday's reversal, oil prices confirmed the 200-day moving average and the resistance level in the previous consolidation area. Although oil prices have exceeded this curve several times over the past year, it remains a trend resistance line.

(In 2008, 2014, and 2020, OPEC tried to shift from supporting oil prices to competing for market share, causing oil prices to fall below $30.

Three attempts by Saudi Arabia and its frenemies to shift from supporting oil prices to fighting for market share in 2008, 2014 and 2020 sent prices below $30, a depreciation of more than three-quarters. But in both cases, the increase in production coincided with an economic and market downturn. That is not happening now, supporting prices and allowing OPEC + to increase quotas.

However, it is much easier for many countries to increase quotas than to increase production. Due to sales restrictions and equipment limitations, countries such as Russia and Iran cannot simply sell their oil and increase production. This will stop prices from falling, keeping them in a downward range rather than falling into a meltdown like we saw in late 2014 and early 2020.

Overall, this supports our previous forecast that, barring any economic shock, WTI will fall to $55 by the end of September and to $50 by the end of the year. Oil prices could also fall to around $30 if there is a risk of a global recession.