Yesterday, the price of WTI crude oil futures fell by more than five percent, making it the biggest drop in more than a year. The price fell from almost $75 and settled at $70. The decline yesterday came as the OPEC member countries opened their taps and increased production. Saudi Arabia, the biggest oil exporter increased supplies by more than 500,000 barrels per day in the month. This was the major driver for the crude oil prices yesterday and it comes two weeks after OPEC’s meeting in Vienna. In the meeting, OPEC members resolved to increase production after achieving their goal of hiking prices.
In recent days, Donald Trump has taken an active role in the oil markets by directly talking to the king of Saudi Arabia about hiking production. At this time, the country can afford lower prices because they are not pushing the IPO of the state-owned Saudi Aramco.
The prices also fell as traders moved past the worries of constrained production from Iran and Venezuela. This is because part of this oil will be replaced by Libya, which had a major deal yesterday after rebels returned a key oil company to the recognized government.
As shown below, the WTI crude is attempting to cross the important support level of $70. The current price is lower than the short and medium-term moving averages. Therefore, as supply seems to increase, there is a likelihood that the pair will continue moving lower. It could even test the important level of $65 per barrel.