Best analysis

The long wait for the much-anticipated Russia-OPEC meeting is almost over. The general feeling is that an agreement will be reached on Sunday in Doha to freeze oil production at January’s levels, with or without Iran’s participation. This outcome is mostly priced in but will still likely give prices a further short term boost. However, will it be a classic case of “buy the rumour, sell the fact” type of a reaction on Monday? Time will tell. In addition, there is a risk that they will fail to find an agreement, in which case oil prices could gap lower at the open on Monday. Given this uncertainty, I would expect at the very least for oil prices to pause at these relatively elevated levels going into the meeting.

In any case, I think the market will be quick to look beyond this Russia-OPEC meeting and focus on the US where oil production has been falling somewhat of late. If further evidence emerges in the coming weeks that point to a more balanced oil market later in the year then prices could further extend their gains. But at the moment the market is oversupplied and US oil inventories are still near record high levels. After last week’s surprise drawdown in US oil stocks, many people were hoping to see another fall or a small build at worst. As it turned out, the Energy Information Administration (EIA) reported a large 6.6 million barrel build from the previous week. This was expected however after the American Petroleum Institute (API) had reported a similar number on Tuesday evening. Also, the sharp drawdown of gasoline stocks (4.2 million barrels) kind of offset the headline increase.

Consequently, oil prices struggled for direction on Wednesday afternoon. Even if prices go on to push higher, I would expect to see some profit-taking in the next couple of days ahead of the Russia-OPEC meeting. In fact, both oil contracts appear to have reached some significant levels, so profit-taking and/or some selling pressure may well be the outcome here.

As the WTI’s daily chart shows, below, it has now reached $42.00 which was a pivotal level in the past. The RSI momentum indicator is also in a state of negative divergence with price, making a slightly lower high which suggests that the bullish momentum is weakening. Likewise, the RSI on the Brent contract shows a similar picture, having reached the “overbought” level of 70. The underlying price action on both oil contracts is bullish, however. The short-term moving averages have turned higher in recent times, while both Brent and WTI have now broken above their respective 200-day moving averages and established clear bullish trends. So, the best outcome for the bulls would be if we see a period of consolidation here, which should allow the oscillators to unwind from overbought levels through time rather than price action. Until and unless the trend lines break down, the sellers will need to be nimble, especially given the abovementioned fundamental risk event. The key levels of support and resistance are shown on the chart in blue and red, respectively.

004

006


 

Trading leveraged products such as FX, CFDs and Spread Bets carry a high level of risk which means you could lose your capital and is therefore not suitable for all investors. All of this website’s contents and information provided by Fawad Razaqzada elsewhere, such as on telegram and other social channels, including news, opinions, market analyses, trade ideas, trade signals or other information are solely provided as general market commentary and do not constitute a recommendation or investment advice. Please ensure you fully understand the risks involved by reading our disclaimer, terms and policies.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE

EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE

EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action. 

EUR/USD News

GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday

GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday

GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance. 

GBP/USD News

Gold price sits at all-time highs above $2,230, US PCE eyed

Gold price sits at all-time highs above $2,230, US PCE eyed

Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited. 

Gold News

Jito price could hit $6 as JTO coils up inside this bullish pattern

Jito price could hit $6 as JTO coils up inside this bullish pattern

Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.

Read more

Key events in developed markets next week

Key events in developed markets next week

Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.

Read more

Majors

Cryptocurrencies

Signatures