After all the talk, OPEC+ to stay the course on supply

If WTI Crude Oil is going to continue to move higher, it must pass through strong resistance near current levels.

Energy 3

With the Delta variant of the coronavirus causing slowdowns in many economies around the world, some were of the opinion that when OPEC+ met today, they would cut back their planned increase of 400,000 bpd that had been decided at the July meeting.  Adding to the nervousness, Russia’s Deputy Prime Minister Novak spoke before the meeting and said that Russia can raise output above OPEC+ quotas.  However, at the 1-hour meeting(!), OPEC+ decided it would be best to stay the course and stick with its original plan of gradual output hikes, which includes the 400,000 bpd increase for October.  OPEC+ plans to meet again on October 4th.   

In addition, EIA data earlier today showed that inventories fell by 7.2 million barrels last week vs a draw of 3.1 million barrels expected.  Inventories have been declining most of the summer, except for 2 weeks. 

How to start oil trading

As Novak’s comments hit the wires, WTI crude oil sold off from roughly 69.00 down to a low of 67.29.  However, as the OPEC meeting concluded and it was announced that no changes would be made to the July decision, WTI retraced nearly all  the move:

Source: Tradingview, Stone X

WTI Crude Oil has been moving higher in an upward sloping channel since its April 2020 lows. However, price pulled back when it ran into 2018 high just above 77.  WTI pulled back in what looks like a corrective channel (green) and held at a confluence of support.  This support includes the bottom trendline of the corrective channel, the 200 Day Moving Average, and the 38.2% Fibonacci retracement from the April 2020 lows to the July 6th highs. 

Source: Tradingview, Stone X

As price bounced from the recent lows, price action may be in the process of forming an inverse Head and Shoulders pattern, stalling at horizontal resistance, the top trendline of the channel,  and the 50% retracement from the July 6th highs to the August 20th lows, near 69.80.  If price breaks above, resistance is at the 61.8% Fibonacci retracement from the same timeframe is 71.25.  Above there, horizontal resistance is at 72.43, with the target of the inverse head and shoulders pattern at the recent July 6th highs.  Support was held today at the bottom trendline of the longer-term upward sloping channel near 67.29.  Below there, price can fall all the way down to horizontal support near 63.87 and then the August 20th lows near 62.43

Source: Tradingview, Stone X

If WTI Crude Oil is going to continue to move higher, it must pass through strong resistance near current levels.  However, don’t look to OPEC+ for any help, as they have decided to stick to the plan of increasing supply by 400,000 bpd. 

*Note that near the US close, Novak was on the wires again, saying Russia will return to pre-pandemic output by 2022.  Market reaction was negligible. 

Learn more about forex trading opportunities.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.