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  • Crude appears to have hit a floor after tumbling from recent multi-year highs.
  • Russia, Saudi Arabia in talks to begin lifting oil production limits.

Crude oil is continuing to trade relatively flat after getting knocked back recently, and WTI crude is trading just above 66.50 for Wednesday.

Oil traders have balked at the news that Russia and the OPEC consortium plan to lift production limits in the coming months and the news, combined with the recent bout of risk aversion that has swept through markets, has seen crude prices decline rapidly, with WTI recently shedding 8.5% from May’s high of 72.83.

The skew on puts and calls for oil has risen to 4% from the previous average of 3% following the revelation that Russia and Saudi Arabia are discussing potentially raising oil output by a million barrels per day, after the two countries agreed last January to cut production by 1.8 million barrels.

WTI levels to watch

Slobodan Drvenica at Windsor Brokers noted that oil is likely to continue heading south, but may consolidate for now, stating that, “penetration of daily cloud (cloud top lies at $66.32) and close below cracked Fibo support at $66.04 (61.8% of $61.80/$72.89 ascend) would generate strong bearish signals for attack at 100SMA ($65.18) and Fibo 76.4% support at $64.42), which guards daily cloud base ($63.80). Meanwhile, oil price may hold in extended consolidation, as slow stochastic is oversold. Broken rising 55SMA (67.08) so far capped upside attempts, but the initial signal of stronger recovery could be expected on a bullish close today, which could risk corrective upticks towards sideways-moving 30SMA ($69.50), before fresh push lower. Res:  67.08; 67.49; 68.50; 69.00. Sup:  66.32; 66.04; 65.79; 65.18.”