- WTI runs to key resistance on high hopes of an OPEC+ accord to cut supply.
- Saudis may have their work cut out in achieving an accord to cut supply.
West Texas Intermediate crude is off from its recent highs at $54.78 having risen from 1.76% to a high of $54.78 sitting around $54.38 currently. As for futures, West Texas Intermediate crude for November delivery added 84 cents, or 1.6%, at $54.15 a barrel on the New York Mercantile Exchange, after falling 0.9% on Monday.
Results of the Candian elections were in earlier and Trudeau will be PM for another run with a minority government – The Canadian Dollar, linked to oil price fluctuations, firmed in its own right, also garnering support from a healthy Bank of Canada Business Outlook Survey. However, the key headlines for Oil stem from sentiment surrounding the forthcoming meeting in December this year between members of the Organization of the Petroleum Exporting Countries and its allies who will consider making deeper reductions to crude output.
OPEC+ could start considering scenarios for deeper cuts
Reuters reported that “two sources from OPEC and non-OPEC producers said that next month the JTC committee, which monitors compliance with the pact, could start considering scenarios for deeper cuts and make its recommendations to the OPEC+ meeting for debate in December.” Indeed, as we have traded the theme for a while now, demand-side concerns have been factors into the price of oil which has been unable to get over the gain line so to speak, with both the smart money/fund managers and speculators increasing their short positions in the face of a deteriorating global economic backdrop.
“Global demand for OPEC crude will average 29.6 million bpd, OPEC said in its latest monthly oil market report, a drop of 1.2 million bpd from 2019,” Reuters reported, noting, “this could press the case for further supply restraint in 2020, another source said – “But it is not just about the numbers. Any decision to cut is also a political one,” that source said.
Analysts at TD Securities, however, highlight a risk that the Saudis may have their work cut out in achieving an accord to cut supply – “Thus far in 2019, tanker war fears, supply disruptions (both structural and temporary) and boiling geopolitical tensions have failed to lift crude prices. And, in this context, we remain concerned that the Saudis may have a hard time convincing other OPEC+ members to deepen their cuts when they meet in December.”
WIT levels
WTI has rallied to test the October resistance just shy of the 55 the figure. Technically, a rejection here could be catastrophic for the bulls and there is still plenty of time for the bears to firm their grip ahead of the OPEC meeting in December – a week let alone two months is a long time in trading the black gold.
However, a breach of the 55 handle will open risk towards the 55 handle and the 200-day moving average where it collides with a 38.2% Fibonacci retracement level. Meanwhile, below the said resistance, bears can look for a break below the 21-DMA around 53.70 then the 50 handle which opens prospects for the Nov 2018 lows at 49.39 again. The 46.90 level ahead of the 18th Dec lows down at 45.77 will then be in focus.
Share
