Oil prices traded on the front foot in Asia on expectations the major oil producers will extend the output cut deal.
The question is whether the major producers will extend the deal by 6-months, 9-months or 12-months. The OPEC monitoring committee has proposed nine-month cut extension. As discussed in a report yesterday, a 9-month extension may have been priced-in by the markets. A probability of a 12-month extension is low, although that could push oil prices above $60/barrel.
OPEC needs to change the perception
Whatever OPEC does, it should be enough to change the erroneous perception in the market that the drop in the OPEC and non-OPEC supply (due to an output cut deal) will be fully compensated by US oil producers. Only then, the oil prices could see a sustained break above $60 levels.
A sustained move above $60 could revive reflation trade at a time when the markets are losing confidence in Trump Presidency and China PPI appears to have topped out. A revival of reflation theme would also make it easy for the Fed to hike rates at a faster pace and also begin the process of balance sheet normalization.
Oil Technicals
Brent Key levels to watch out for
|
Brent Oil |
Monthly |
Weekly |
Daily |
|
R1 |
$58.35 (Jan high) |
$56.62 (Apr high) |
$55.08 (Feb 17 low) |
|
R2 |
$63.92 (Sep 2009 low) |
$58.35 (Jan high) |
$56.62 (Apr high) |
|
R3 |
$66.53 (200-MA) |
$62.97 (Feb 2015 high) |
$57.41 (Feb 2 high) |
|
S1 |
$52.83 (June 2016 high) |
$52.75 (10-MA) |
$53.82 (100-DMA) |
|
S2 |
$51.38 (Feb 2015 low) |
$52.04 (5-MA) |
$52.47 (50-DMA) |
|
S3 |
$46.62 (monthly low) |
$51.22 (50-MA) |
$52.04 (200-DMA) |
- A sharp recovery from the low of $46.62 if followed by a break above the resistance offered by rising trend line (drawn from 1998 low and 2008 low) would open doors for a re-test of $58.35 (Jan high) and $60.00 levels.
- A close above $60.00 would also help the RSI breach the falling trend line. That would mark a long-term trend reversal and would open up upside towards $66.53 (monthly 200-MA).
- On the downside, a break below $50.00 would revive the bearish view.
WTI Key levels to watch out for
|
WTI Oil |
Monthly |
Weekly |
Daily |
|
R1 |
$55.22 (Jan 2017 high) |
$53.76 (Apr high) |
$52.20 (May 24 high) |
|
R2 |
$57.04 (Oct 2006 low) |
$55.22 (Jan 2017 high) |
$52.75 (Feb 15 low) |
|
R3 |
$63.59 (200-MA) |
$62.58 (May 2015 high) |
$54.36 (Dec 2016 high) |
|
S1 |
$50.15 (10-MA) |
$49.07 (50-MA) |
$51.14 (100-DMA) |
|
S2 |
$47.05 (Mar 2017 low) |
$45.52 (100-MA) |
$50.72 (Jan 10 low) |
|
S3 |
$42.06 (Mar 2015 low) |
$43.78 (May 2017 low) |
$49.70 (200-DMA) |
WTI Oil monthly chart
The price action is similar to the one seen on the Brent chart. An additional positive here is that the RSI has already breached the falling trend line.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.