Crude Oil Technical Preview for November 28th

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Crude Oil falls to 4-year lows as OPEC sticks to production levels of 30mn barrels a day

The much anticipated bi-annual OPEC meeting concluded yesterday with no major decisions being taken. OPEC decided to continue to stick with the current production levels sending Crude oil futures trading below $70. The pre-meeting negotiations saw countries such as Algeria and Venezuela pushing for production cuts, but ultimately, Saudi Arabia prevailed as the country, along with Kuwait managed to keep the current levels of production unchanged.  The OPEC Chief, Abdallah Salem el-Badri was seen to be jovial at the press conference in an effort to allay that the oil cartel was worried about falling crude oil prices. El-Badri was also of the view that the prices should start to stabilize around 2015 and is expected to return to its nominal price around 2016.

With Saudi Arabia refusing to cut production amidst slowing demand from China, Japan and the US economic recovery being only ‘modest’ at best Crude oil prices could potentially fall further. OPEC Chief mentioned that there was no ‘target price’ for oil but only a ‘fair price’ one which would be dictated by the markets. This statement essentially paves way for possible declines in Crude oil should the US keep up with production on its end, reducing its imports and reliance on OPEC.

Falling Crude oil prices took its toll on currency proxies with the Norwegian Krone and the Canadian dollar weakening on the news.

While the decision to keep up with the current production levels might have soured countries such as Iran, Russia, Algeria and Venezuela, the decision seems to be a well thought out strategy. It is widely speculated that the cheap Shale oil production in the US will start to suffer if prices trade near the $60 handle and with OPEC unchanged in production, this move could well be seen as way to weed out weaker shale oil drilling companies in the US before prices can stabilize.

Crude Oil Technical Analysis

Starting with our preferred monthly charts, with the fundamentals supporting the technical charts, we could possibly see a quick decline to 62.45 the major triangle’s price objective if the current status quo remains unchanged; ie: continuing increase in production with stock piles growing. However, in lieu of the holiday season coming up the possibility of more fuel consumption could perhaps take the pressure as Crude oil stock piles should start to diminish more quickly than anticipated which should help support the prices.

crude oil

 

The 4-hour charts for Crude Oil shows that with the major support level being broken at 73.71, we could possibly expect to see a rally back to this technical support before prices can resume lower. However given that the markets are currently very bearish on Crude oil, it could possibly take a few weeks before prices stabilize and we start to see the fundamentals supporting crude oil prices pushing them higher. In the event we don’t see any retracement to the support at 73.71 to be tested for resistance, Crude oil could simply continue to drift lower towards the eventual target of 62.45

crude oil

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