{x} | Trading.live

Abstract: Oil prices rose slightly after a series of declines, and WTI crude oil is currently trading at close to US$78.00 per barrel, reversing the decline in previous trading days. However, as the market weighs the possibility of further production reduction by OPEC+, the current price increase may be just a flash in the pan.

Fundamentals

Before the meeting of OPEC+ representatives held on Thursday, the crude oil market was cautious. At present, OPEC+ has not yet resolved the deadlock with some African member countries on oil production quotas, which has forced the organization to postpone a meeting when oil prices have fallen.

Representatives said that Saudi Arabia, the de facto leader of OPEC+, had asked other member countries to reduce production quotas to boost the market, but some member countries resisted. Among them, Angola and Nigeria "have reached an agreement", and these two African countries oppose the restriction of lower output quotas in 2024.

A representative said that this contradiction may not be resolved before the OPEC+ meeting scheduled for November 30, or the meeting needs to be further postponed.

Market observation: Due to sufficient supply and concerns about the global economic background, the price of crude oil has dropped by about one-fifth since late September, which put pressure on OPEC+ to intervene in the online meeting on Thursday.

With low crude oil prices and the possibility of another crude oil supply glut, the market will not be able to get away from OPEC+ this week, barring any negative surprises. What's more, U.S. output is also rising to a new record, which, combined with the weak global demand outlook, constitutes another reason why the recovery associated with the decision could be short-lived. As a result, oil prices are likely to remain on a downward trend for an extended period, which could lead to a decline in global headline inflation and could prompt central banks with economies on the brink of recession, such as those in the eurozone, to cut interest rates sooner than currently expected.

A survey of traders and analysts conducted by Bloomberg late last week showed that about half of the respondents expected OPEC+ to take further measures to tighten the market. If the group does not announce an additional production reduction of about 1 million barrels per day based on Saudi Arabia's restrictions, oil prices may fall to the US$70 threshold.

Finally, the EIA Crude Oil Inventories report due later today shows a possible small decrease of 933,000 barrels versus previous forecasts for an increase of 800,000 barrels, suggesting that demand may have picked up or supply may have been constrained during the reporting period.

Either way, investors can rest assured that crude oil consumption and prices are likely to be supported in the near term, especially if the results are announced beyond expectations. A surge in risk-taking behavior could also bring gains for crude.

On the other hand, the unexpected increase in crude oil inventories indicates that limited consumption or increased supply may lead to a decline in WTI crude oil prices. The return of capital flow may also bring some downside to crude oil prices. The recent price increase may be seen as an opportunity to go short at the highs.

Technical Analysis

WTI Crude broke above the symmetrical triangle resistance level around US$76.00, suggesting that crude oil prices could rebound to the same height as the pattern in the near term.

However, technical indicators look mixed. 100 SMA is currently below the 200 SMA, suggesting that the path of least resistance is to the downside, or that crude prices are more likely to fall back to the triangular support level around US$75.00. A larger pullback would stop at the key support at the US$73.33 level.

Additionally, crude oil has climbed above both technical indicators; therefore, these indicators could become dynamic support near the top of the triangle.

In addition, the stochastic indicator is already indicating that the bulls are overbought or exhausted; therefore, a move lower would signal the return of bearish pressure. Similarly, the Relative Strength Index has begun to fall, suggesting that the bears will soon return; therefore, the price could follow suit. Finally, both oscillators have enough room to cover before reaching oversold levels. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 77.70

Target price: 73.33

Stop loss: 79.96

Deadline: 2023-12-13 23:55:00

Support: 76.30, 74.78, 73.81

Resistance: 77.99, 78.65, 79.65