Despite a larger-than-expected production increase from OPEC+, oil prices are rebounding. Is this a sign of strength in a tight market or just a temporary bounce within a long-term downtrend?
OPEC+ Announces Bigger Output Increase Than Expected
OPEC+ has announced that it will increase oil production by 548,000 barrels per day in August, exceeding the previously expected rise of 411,000 barrels per day. This follows three consecutive months—May, June, and July—of 411,000 bpd increases.
The decision reflects two main drivers:
-
A resilient global economy sustaining strong oil demand.
-
A desire to regain market share, particularly from U.S. producers who have been steadily increasing output.
Yet, despite this more aggressive supply stance, Brent crude prices surged, surprising some market observers. Analysts point to continued tightness in the oil market and suggest that downside risks remain limited, at least in the near term.
However, macroeconomic uncertainty remains a wildcard. Potential trade tariffs, like those recently proposed by former U.S. President Donald Trump, could dampen global trade flows and undermine oil demand.
Technical Analysis: Still in a Downtrend Channel
The weekly Brent crude chart shows the price still trading within a well-defined descending trend channel, stretching back more than two years.
Resistance and Moving Averages
-
Price is currently hovering just above $70 and faces immediate resistance at $71 and around the level of the 34-week EMA.
-
Above that, $77 and $81 remain formidable resistance levels. These are the upper bounds of the channel and previous swing highs.
-
Both the 21-week and 34-week EMAs are still sloping downward, which signals that the broader trend is bearish for now.
Indicators
-
The RSI is just below 50 and hasn’t yet broken into bullish territory. It recently bounced from the 40 zone but remains neutral.
-
The MACD is still below zero and is confirming the downtrend.
Bullish Scenario: Breakout Potential
If Brent crude can push decisively above $71, and especially $77, the price could start to challenge the upper boundary of the downtrend channel. A breakout above $81 would likely flip the longer-term trend to bullish, targeting levels like $87 or even $94.
In that case, traders would likely see the OPEC+ output increase as already priced in, with resilient demand and tight supply dynamics taking over.
Bearish Scenario: Resistance Holds
If Brent gets rejected at the current resistance levels or around $77 – $81, we could see another leg down toward $65 or $59. This would align with the prevailing downtrend and confirm that the recent rally was a dead cat bounce rather than a sustainable reversal.
Watch for:
-
A move back below $68, which would signal weakness.
-
RSI rolling over below 40.
-
A bearish MACD crossover or histogram contraction.
Conclusion
Despite the surprising OPEC+ output hike, oil prices are rising, supported by a tight market and resilient economic demand. But the charts tell us we’re not out of the woods yet. The downtrend remains intact until Brent clears multiple resistance levels.
Will oil break out of its bearish channel, or is this just another bounce within a broader decline?
