IronFX

WTI inches up on Saudi oil minister comments

• Oil prices inched up this week, following some comments from the Saudi oil minister on Tuesday that his country is willing to “do whatever it takes” to rebalance the oil market. Given our proximity to the November OPEC meeting, these remarks may have enhanced speculation that the cartel could make deeper cuts to its production, or that it may extend the current deal for a longer period of time. That said, even though oil prices reacted positively to these signals, we have to note that the surge was not particularly large, a factor that reinforces our view that most of the “good news” around an OPEC deal may be priced into the market by now.

• WTI traded somewhat lower on Wednesday, after it hit resistance at 52.60 (R1). Nevertheless, the slide was stopped by the 51.90 (S1) support level. With no clear trending structure on the 4-hour chart, we prefer to remain sidelined for now. What’s more, on the 20th of the month the price emerged back above the key barrier of 51.50 (S2), which is the lower bound of the wide sideways range we mentioned numerous times. The range between that hurdle and the 55.30 zone is the territory where we believe US shale producers are attracted to begin to raise production notably, as their profit margins recover. As such, even if the price trades higher in the days to come, we are hesitant to call for a healthy uptrend and we maintain our view that further near-term gains in the precious liquid are likely to remain limited within the aforementioned range.
• Our short-term momentum studies support further our view to stand pat and be mindful that any possible future gains are likely to remain limited. Although the latest peaks in the price action were formed at the same about level, specifically near 52.60 (R1), the respective peaks of our momentum indicators have a downward tilt. On top of that, the RSI slid to hit its 50 line, while the MACD, although positive has peaked and fallen below its trigger line.

• Zooming out to the daily chart, we can see much clearer the range we have been discussing for so long, and the frequent rejections from near or within it.