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Summary: Ahead of the OPEC+ online meeting scheduled for November 30, the crude oil market may face challenges in rebounding as bearish sentiments strengthen. WTI crude oil futures are currently hovering near $75.00, close to the July lows, due to disputes over production quotas for African member countries by Saudi Arabia and its allies, leading to the postponement of the originally scheduled meeting to this week.

Fundamentals

The current overall stability in the oil market, with prices holding within recent ranges, has everyone's attention focused on the (delayed) OPEC+ meeting set for Thursday. According to recent news over the past two days, there is growing belief that a compromise on production levels for 2024 is achievable. However, the most likely outcome seems to be a continuation of existing production cuts rather than any new drastic changes.

This outlook is unlikely to change substantially unless there is an unexpected further cut in production, leading to bearish sentiments in the short term. A key factor influencing this perspective is the rise in US inventory levels. Meanwhile, China, a major participant in global crude oil demand, continues to experience lukewarm economic growth. Despite some positive signs in the Chinese economy, they are not significant enough to markedly alter demand dynamics.

Another crucial factor in this equation is Saudi Arabia's decision to voluntarily cut an additional 1 million barrels per day, with this reduction plan set to expire at the end of December.

Traders cautiously anticipate further production cuts by OPEC+. The initial optimism that propelled WTI crude oil to around $80.00 has faded, and bearish options have reached record levels. To restore credibility, OPEC+ may need to deliver a significant surprise.

Additionally, other indicators in the spot market, including price differentials between specific grades, have been issuing warning signals. Against this backdrop, the International Energy Agency (IEA) predicts a return to oversupply in the market next year. Currently, Saudi Arabia and Russia are expected to extend voluntary production cuts, with market observers suggesting the possibility of further collective cuts.

WTI crude oil will gather clues this week from inventory data from the American Petroleum Institute (API) and the Energy Information Administration (EIA). An increase in inventories may reflect soft demand or rising supply levels, potentially prompting the selling of crude oil.

On the other hand, a modest increase or substantial decrease in inventories may reflect weak consumption, keeping traders vigilant about potential economic recession or softening demand for energy commodities.

Risk appetite may also drive volatility in risk assets, with enhanced risk-taking actions potentially stimulating demand for high-yield assets like crude oil. Conversely, a return of safe-haven funds may trigger a decline in crude oil prices.

WTI crude oil is still in a downtrend initiated from $93.94. From a technical perspective, the short-term outlook remains bearish, with resistance at $79.98 and support in the range of $63.37-$66.94. Strong support could lead to a rebound. Overall, mid-term range trading should continue to be maintained above $63.67 unless there are significant developments.

Technical Analysis

WTI crude oil has formed lower highs and higher lows, and the current price is consolidating within a symmetrical triangle pattern. The price has broken below the support level and may potentially rebound to the resistance level.

The 100 SMA is above the 200 SMA, indicating that the path of least resistance in the short term is to the upside, and support is more likely to hold than be breached. Additionally, upward pressure aligns with the triangle's top near $77.00, adding strength to its role as an upper limit.

The stochastic oscillator is entering oversold territory, reflecting exhaustion in the bearish momentum; thus, as the oscillating indicator rebounds, a moderate rally could drive prices higher. Similarly, the RSI seems to be approaching its bottom, suggesting that bullish momentum may return.

Nevertheless, a breakdown below the triangle's bottom could trigger selling equivalent to the chart pattern's height. Similarly, a breakout above the triangle's top could stimulate a rebound of the same magnitude, with the volatility range around $72-$78. In terms of trading strategy, the focus is on selling high and buying low.

Trading Recommendations

Trading Direction: Long

Entry Price: 74.00

Target Price: 77.93

Stop Loss: 72.37

Valid Until: 2023-12-11 23:55:00

Support: 74.08, 73.33, 72.36

Resistance: 78.42, 79.64, 80.85