Forex Trading Library

When Will Crude Oil Rally? OPEC Discusses Further Output Cuts

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If you look at Crude Oil charts, including Brent and WTI whether on the daily or the hourly chart, you can definitely see that nothing has improved. It’s actually getting worse.

Since the decision of OPEC last week to extend December’s deal for nine months, the prices have lost more than 3% and still sliding. Brent is close to $50 barrier while WTI Crude is trading below $49.

Why Crude Declines Despite OPEC Meeting?

Once again I would like to remind traders that most of the extension deal has been priced in in the markets.

The talks about extension have been on the market since January; the prices were declining even after December deal, as December decision has been also priced in for more than six months.

Producers Are Active Again

As we noted many times in our previous reports, expect OPEC and Non-OPEC members will be very active through the media especially if Oil prices did not react positively to the latest decision.

Indeed, the prices kept on declining further, leading OPEC and Non-OPEC members to come out and talk about what might happen after the recent deal expires in March of next year.

The new information for the market from all the producers is that all the producers are ready to cooperate with each other even after the deal expires in March of next year.

Yet, the prices are still in a downtrend and likely to accelerate in the coming days and weeks.

When Crude Oil May Rally?

As mentioned in our previous reports, the extension of the previous deal is not going to support the prices to new year’s high.

Since the prices did not react positively after December decisions and failed to reach a new high of this year, this means that the prices need more actions.

Actions don’t mean remarks, statements or comments or even another extension. Action means that OPEC and Non-OPEC members need to agree on a bigger cut in oil output.

For the time being, there are no indications for another rally anytime soon, especially if the remarks continue with no action.

OPEC Increasing The Possibilities

At the time of writing,  breaking news had hit the wires “OPEC could revive the idea of deeper supply cut at next meeting if oil inventories stay high.”

Yet, the talks and remarks about a potential output deal, the prices are still on the downside until this report is released.

This also gives us a clear sign that with no real action on the ground, the down trend is here to stay.

Levels To Watch

In Brent Crude, traders need to keep an eye on $50 mark, as it represents a solid psychological support, as a break through that support would clear the way for deeper declines.

The 2nd level to watch stands at 49.70 which represents March’s lows. A break through that support would clear the way for further declines probably toward new year’s low around $46.50

As for WTI Crude, the first immediate support stands around 47.11, while a breakthrough that support would allow further declines to new year’s lows around 43.81.

On the upside view, any rally is expected to remain below the downtrend line resistance which stands 51.50.

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