WTI down to test trendline support and bears look to close below 38.2% Fibo support

• Fundamentals playing out, weighing heavily on sentiment for lower oil.
• 54.80 gave out and focus is now on a close below the 38.2% Fibonacci retracement support.

OPEC and allies disappointed the energy markets by failing to commit to bigger production cuts to combat the presumed increase in supply considering easing tensions between the U.S. and Iran. 

"Just as risk appetite and drawing inventories started to generate positive momentum and CTA buying in the energy markets, the news that President Trump was weighing the possibility of easing the Iran sanctions roiled the market,"

analysts at TD Securities explained. 

The next OPEC meeting will be in Vienna on Dec. 4 and Oman’s oil minister, Mohammed bin Hamad al-Rumhy, said OPEC+ would discuss the possibility of deepening the existing output cut deal then.

Not expecting increases in Iranian crude production any time soon

However, while stored Iranian product could flood the market, and is certainly negative for sentiment, analysts at TD Securities argued that at this point, it is not clear that an easing of sanctions would necessarily get Iran to the negotiating table:

"Any easing measure would most likely come in the form of renewing the previous waivers, which in the grand scheme of things had little impact on Iranian production. Furthermore, Pompeo remains an Iran hawk and the administration stated the maximum pressure campaign remains, even after Bolton's dismissal." The analysts at TD Securities are not expecting increases in Iranian crude production any time soon. 

However, further justifying the bearish case for now, OPEC on Wednesday lowered its forecast for global oil-demand growth in 2019 and 2020 and, in adition,  the Energy Information Administration reported that U.S. crude supplies fell by 6.9 million barrels for the week ended September 6th for the fourth weekly decline in a row. The IEA report warned of "daunting" surpluses in 2020 -

"But with the new Saudi oil minister and the Aramco IPO around the corner, it would not be inconceivable that the Saudi's deepen their cuts for a period of time, suggesting current weakness in markets may be over-exaggerated in the near term. Nonetheless, the selloff has crippled the upward momentum, forcing CTAs to abandon their recent buying programs, with downside triggers within reach once again at $54.18/bbl for WTI,"

the analysts at TD Securities argued. 

WTI levels

Technically, the daily doji had been painted on the daily time frame earlier in the week and it has certainly played out well, with an aggressive sell-off of over 6.5% down to trendline support. 54.80 gave out and focus is now on a close below the 38.2% Fibonacci retracement support of the July swing highs to May-July horizontal support which guards 53 the figure and the 23.6% Fibo of the same range. The upside target is the 78.6% Fibo and Sep highs in the 58.70s.