Crude oil prices edged higher yesterday, by approximately 2 percent and closed at $50.764 per barrel, back to above $50 after last Friday’s significant drop. The surge was encouraged by Saudi Arabian export cuts in November and comments from OPEC (the Organization of the Petroleum Exporting Countries) and trading companies that the market is now rebalancing after years of oversupply, for instance, U.S. shale oil producers will also make efforts to reduce supply.
To commit responsibilities in the oil cut deal, Saudi Arabia announced to cut November allocations by 560,000 barrels per day (bpd), which could boost oil prices due to the supply cut. The deal is set to end in March 2018 and the possibility of extending it has been come up with.
At a conference in New Delhi, OPEC said there were “clear signs” the oil market started to rebalance after years of oversupply. OPEC has been working to reduce oversupply with an agreement among its members and non-members including Russia to cut oil production by 1.8 million barrels per day (bpd), to get rid of a price-snapping supply glut.
“The process of global destocking continues, both onshore and offshore, with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions,” OPEC secretary general Mohammad Barkindo said.
Over the short-term outlook of U.S. production, Hurricane Nate has also prompted prices amid some U.S. production remaining offline. According to the data released by the U.S. Department of the Interior yesterday, 85 per cent of U.S. Gult of Mexico oil production, or nearly 1.49 million barrels per day, was still offline, but it won’t last long.
Technically oil prices have jumped slightly to $50.792 per barrel as of 11:45 a.m. in Sydney, showed in the MT4. It shows that the price has successfully broken out the resistance of August 1st’s high and stood stably. With a 56.8548 of RSI (14) revealing a positive strength in oil prices, it has been in an ascending developing channel started from the end of June.
Chart 1: WTICOUSD Daily
Although we should see further rise over the mid-term, it is facing an obstruction, found at 50.859 (23.6% retracement) over the following few days when we use Fibonacci retracement to predict its movement.
Chart 2: WTICOUSD Daily – Fibonacci retracement