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  • WTI bears taking back control as price reverts back below the hourly  21-SMA.
  • OPEC meeting is the key focus, bulls looking for confirmation of output cuts.  

WTI has started to make tracks to the downside following a bullish opening start to the week where the price gapped close to 2% higher, extending its run to trade to a high of $53.96. President Vladimir Putin, in a press conference late Saturday, said he and Saudi Crown Prince Mohammed Bin Salman agreed to extend output cuts. Additionally, Canada’s oil-rich Alberta province has announced surprise output curbs. Alberta Premier Rachel Notley said she has ordered oil companies in the Canadian province to cut production by nearly 9% next year, further boosting the price of crude on Monday. We also had the news today that Qatar will pull out of OPEC by January 1st putting more focus on the production of its natural-gas.

When adding in the risk-on sentiment in the market following the Sino/US trade war ceasefire where risky asset classes can benefit, WTI was well supported heading into the European open. However, the price started to tail off in Western markets as the dollar managed to reclaim territory back towards the 97 handle in the DXY, despite US bond yields on the decline, falling to their lowest levels in the US shift to below the 3.00% handle.  

WTI remains in the doldrums

However, WTI remains in the doldrums of the early October route where they dropped by a third in as little as over two months due to growing concerns over global economic growth and demand. The focus is now shifting towards Thursday-Friday OPEC meeting in Vienna and markets will be paying particular attention to whether output cuts are needed. Analysts at Goldman Sachs estimate that “a cut in OPEC and Russia production of 1.3 [million barrels a day]will be required to reverse the ongoing counter-seasonally large increase in inventories and bring stocks back to their 5-year average level.”

WTI levels

Technically, WTI bulls have managed to move out of the immediate danger zone and support line  between the yearly lows of 49.66 and the psychological 50 handle. The price has pierced the 10-D SMA located at 52.39 and up to R3 located at $53.87. However, the hourly price action has WTI submerged back below the 21-hr SMA as the price moves towards a closure of the bullish opening gap with only the 52 psychological level in the bear’s path with the confluence  of the 50-hr SMA as support. Daily & weekly RSI has managed to climb back above 30, but monthly RSI and DMI remain with a negative bias. Bulls need to get above the 23.6% Fibo retracement of the recent rout from just below the 77 handle at 56 with the confluence of the 21-D SMA at 56 and hold above R3. Bears are otherwise in control and look to the 123.6% Fibo extension target is located in the 43.90s while the June 2009 lows are nearby at 41.83. The 161.18% Fibo extension target is situated at 33.77. The Jan 2016 low is located at 26.03.