Traders Cast Doubts on OPEC’s Output Cut Deal, WTI In Bearish Mood

U.S. crude (WTI) prices swung between gains and losses on Monday; weighed by concerns that global glut will remain over a long time as OPEC saw record output last month while U.S. rig count continued to rose last week.

NYMEX crude for December delivery held near $43.05 per barrel, the weakest level since September 20th. Oil has been under downward pressure since the Organization of the Petroleum Exporting Countries (OPEC) on Friday reported that its output rose to a record 33.64 million barrels per day (bpd) in October, up 240,000 bpd from the previous month.

Investors are skeptical about OPEC’s plan to curb output to between 32.5 million and 33 million barrels a day reached in their meeting in Algeria late September. According to Algeria’s state news agency on Sunday, Saudi Energy Minister Khalid al-Falih said that it was imperative for OPEC members to reach a consensus on activating such deal.

However, investors are also concerned over the effectiveness of any agreement reached during the cartel’s Nov. 30 meeting, as not only are OPEC’s members namely Iran, Nigeria and Libya ramping up their output but U.S. oil producers are coming back to the market.

While Iran has been reported to open three oilfields with a total production of more than 220,000 bpd on Sunday, Baker Hughes on Friday also showed active drilling rigs in the U.S. rose by two to 452 in the week to Nov. 11, marking the 21th increase over the last 24 weeks.

Some analysts claimed that Donald Trump’s victory in last week’s U.S. election will open a chance for the domestic energy industry to be revitalized. Therefore, any agreement to cut output and support prices from some OPEC and non-OPEC members may be a victory for U.S. shale producers.

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Fig: WTI D1 Technical Chart

WTI crude price has been wobbled above the 43.05 support. This level proves to be a firm stance that has prevented price from falling deeper since the start of September. Crude price pulled back last Wednesday but failed to move past the 23.6% Fibonacci level. With the short-term MA20 having crossed the long-term MA50 from above, the commodity may test the 38.2% support at 42.20.

Trade suggestion

Sell Stop at 43.00, Take profit at 42.20, Stop loss at 43.40

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