Crude Oil Price Talking Points
- Recent developments coming out of the Organization of the Petroleum Exporting Countries (OPEC) may fuel the recent rebound in the price of crude oil as group emphasizes its pledge to balance the energy market.
Fundamental Forecast for Crude Oil: Neutral
The price of oil holds the monthly opening range, with crude marking a failed attempt to test the October-low ($50.99) as OPEC appears to be on track to curb production beyond 2019.
In fact, OPEC and its allies may take additional steps to avert lower energy prices at the next meeting starting on December 5 as Secretary GeneralMohammad Sanusi Barkindoencourages the participating nations in the ‘Declaration of Cooperation’ to put “all options on the table.”
The comments suggest OPEC+ will implement additional cuts to production to keep oil prices afloat, but it remains to be seen if the group will make a major announcement ahead of 2020 as Russia Energy Minister Alexander Novak expects oil prices to float “around $50” in the medium-term.
Nevertheless, the most recent Monthly Oil Market Report (MOMR) continues to warn of lower consumption in 2019, with the forecast “revised lower by 0.04 mb/d to 0.98 mb/d, with total oil demand standing at 99.80 mb/d.”
The weakening outlook for global consumption may push OPEC and its allies to take a more aggressive approach in balancing the energy market especially as US crude output hits a fresh record high in October.
Fresh updates from the US Energy Information Administration show weekly field production climbing to 12,600K from 12,400K in the week ending September 27, with oil prices facing a greater risk of a bear market ahead of the next OPEC meeting amid the ongoing pickup in US output.
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Oil Daily Chart
Source: Trading View
The broader outlook for crude oil remains tilted to the downside as a ‘death-cross’ formation took shape in July, with recent developments in the Relative Strength Index (RSI) offering a bearish signal as the oscillator snaps the upward trend from June.
However, the flattening slopes in the 50-Day ($55.37) and 200-Day SMA ($56.76) warn of range-bound conditions as the moving averages converge with one another, with decline from the September-high ($63.38) failing to produce a test the 2019-low ($50.52).
In turn, the lack of momentum to close below the Fibonacci overlap around $51.40 (50% retracement) to $51.80 (50% expansion) may generate range-bound conditions, with the $54.90 (61.8% expansion) to $55.60 (61.8% expansion) region on the radar as it lines up with the October-high ($54.84).
A break of the monthly opening may spur a run at $57.40 (61.8% retracement), with the next area of interest coming in around $59.00 (61.8% retracement) to $59.70 (50% retracement).
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— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong.