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.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD eases to 0.9900 on disappointing German data

EUR/USD eases to 0.9900 on disappointing German data

EUR/USD is paring back gains towards 0.9900 in early European hours, as German Factory Orders disappointed with -2.4% in August vs. -0.7% expected. The US dollar licks its wounds amid a better market mood. Eurozone data and ECB minutes are awaited. 

EUR/USD News

GBP/USD remains pressured towards 1.1300 amid UK rating downgrade

GBP/USD remains pressured towards 1.1300 amid UK rating downgrade

GBP/USD is reversing towards 1.1300, as investors digest Fitch Ratings downgrade to the UK sovereign ratings amid political and economic woes. The pair shrugs off a risk-on market profile and a broadly subdued US dollar. US data next of note. 

GBP/USD News

Gold poised to challenge September highs at $1,735

Gold poised to challenge September highs at $1,735

Gold price is attempting a bounce as US dollar holds lower ground with yields. Market remains upbeat despite a lack of clarity on the Fed rate hike outlook. XAU/USD eyes $1,735 on a sustained break above the 50 DMA barrier.

Gold News

Crypto.com price consolidates, forecasting a 22% rally for CRO holders

Crypto.com price consolidates, forecasting a 22% rally for CRO holders

Crypto.com price seems to have undone its breakout gains seen in the last week of September. This downtrend has morphed into a tight consolidation showing no volatility. 

Read more

Is the recent S&P 500 rally sustainable?

Is the recent S&P 500 rally sustainable?

Can we trust the recent rally? The market just rallied +5.7% in two trading days. Bulls argue that the rebound could push even higher as the start of Q3 earnings season starts up next week.

Read more

Majors

Cryptocurrencies

Signatures