Oil rebounds, expect a cautious stance from OPEC+

Oil rebounds after Friday's selloff looks overdone. OPEC+ meeting on Wednesday & Thursday could see the oil cartel adopt a cautious approach.

Energy 3

Selloff overdone

After tanking over 13% on Friday oil is rebounding on Monday, trading almost 5% higher at the time of writing. Friday’s Omicron inspired selloff looks rather overdone, particularly given that not much is known about the new covid strain. 

Omicron risk 

Over the weekend the World Health Organization said that it would take time to understand the severity of the newly discovered, highly mutated covid strain. However, anecdotal evidence from South Africa suggest that it could be more contagious but less severe, which is helping to lift risk sentiment in the market. That said it is still very early days and governments across the globe are tightening travel restrictions as a pre-caution. 

Strategic reserves release 

The latest injection of volatility into the oil markets comes after the announcement of a US led a coordinated release of strategic oil reserves earlier this month. The release of such reserves could be unnecessary should the Omicron variant result in more mobility restrictions. A combination of more supply entering the market combined with a clouding demand outlook could see oil prices struggling to gain from here. 

OPEC+ meeting 

OPEC+ are due to meet this week on Wednesday and Thursday to decide whether to enact the planned 400,000 barrel per day increase in the face of the planned release of strategic reserves and rising covid risks.  The technical meeting has been postponed in order to have more time to assess Omicron’s impact on demand. 

The group is expected to adopt a cautious stance with demand likely to weaken over the coming winter months. OPEC have already warned of a potential supply glut next year, even before the Omicron discovery. Hopes that OPEC+ could pause the planned increase in production is helping to boost the price. 

Learn more about trading oil 

Where next for WTI oil prices? 

WTI oil is attempting a solid rebound from Friday’s low of $67.31, retaking its 200 sma at $69.75. A daily close above here would support the bulls case. However, the RSI remains firmly in bearish territory supporting the case of further downside. 

Any meaningful recovery needs to retake the 72.00 today’s high in order to expose the 100 sma at 74.00. 

Meanwhile sellers will be looking for a move below 70.00 round number to test the 200 sma again at 69.70. 

 

oil chart

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

 

 

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.