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Fundamentals

During the Asian session on Friday (December 8), WTI crude oil edged up and is currently trading around $70.4 dollars per barrel. Yesterday, oil prices fluctuated in a narrow range around 70 throughout the day and did not continue to weaken. After being oversold, oil prices have found support around $70, the bottom for this year. It was obviously because short-sellers took profits. WTI closed with a small Doji Star, and a phased bottom occurred. In the American session, the main news was the Russia's visit in the Middle East. Russia and Saudi Arabia unanimously emphasized strengthening cooperation in the field of crude oil and natural gas and called on all OPEC+ countries to join the production cut agreement. They also stressed that if oil prices continue to be sluggish, production cuts will be intensified. This is the second time this week that Saudi Arabia express its determination to implement production cuts, which may improve the supply-demand balance of the global oil market in the first quarter. The sharp drop in oil prices in the early stage was mainly due to the excessive expectation of the demand recession, coupled with doubts about the execution of production cuts. But with Saudi Arabia and Russia's statements, perhaps the market has underestimated their determination. In terms of demand, bears may have exaggerated the sluggish demand situation to dampen oil prices. The daily demand for crude oil in 2023 is still higher than that in 2022, but the production is 1 million b/d lower than in 2022. Especially in the first quarter of 2024, the pattern of supply reduction and demand increase will continue. The current oil price is undervalued, and perhaps the range of 78-84 in August this year is a relatively appropriate level. Of course, the market always likes to jump the gun and make up stories. If you get into the play, you will be caught in the story!

News: Algeria's energy minister said OPEC+ may consider additional measures to stabilize the oil market. Pavel Sorokin, Russia's First Deputy Minister of Energy, said that the Russian Ministry of Energy is not considering lifting the ban on winter diesel exports. In a joint statement on Thursday between Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, Putin urged all OPEC+ countries to join the production cuts deal and stressed the importance of continued cooperation between the two countries. At the same time, Russia also pointed to the need for all allies to join the OPEC+ agreement in a way that is in the interests of both producer and consumer countries and supports global economic growth.  

Today, investors need to pay attention to the US non-farm payrolls data and employment participation rate for November, as well as the University of Michigan consumer sentiment index for December.  

Technical Analysis

Oil prices were temporarily stable around 70 yesterday and mainly fluctuated in the 69.0-70.6 area. Finally, the market closed with a Doji Star, ending 5 consecutive bears. As the current market price level saw a high trading volume in the first half of the year, a deep decline is unlikely to happen. However, after the previous sharp fall, the market has less confidence, so time is need to exchange for trading space. Oil prices will be volatile, which will probably extend the pattern in June. Yesterday, we reminded you that if oil prices can build the bottom in the next two days, aggressive traders can try to go long with small positions. After the Doji Star yesterday, perhaps the bearish momentum has been fully released. Investors can pay attention to the buying opportunity around 70. The reference range for today's trading is 69.5-72.5.

Trading Recommendations

Trading Direction: Long

Entry Price: 70.000

Target Price: 72.500

Stop Loss: 69.500

Support: 69.000/67.000

Resistance: 71.500/72.500