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Oil Nears 27-Month High But OPEC Extension Needed

Oil Nears 27-Month High But OPEC Extension Needed

Nick Cawley, Senior Strategist


Talking Points:

  • Oil continues to push higher but further gains may be difficult.
  • OPEC and the EIA see demand growing as global growth picks-up.
  • Further gains will be predicated on OPEC extending production cuts.

Fundamental Forecast for Oil: Neutral

The price of a barrel of Brent crude, the global oil benchmark, hit a near 5-month high this week as the supply/demand imbalance continues to narrow but traders are now looking for additional action from OPEC when the current arrangement ends in March 2018. The latest release from the joint OPEC - Non OPEC Ministerial Monitoring Committee (JMMC) said that in August compliance with the production cuts hit a record 116%. And recent reports from both OPEC and the EIA showed that demand for oil continues to rise as global growth expands.

Further production cuts may be needed however to support the current level of oil which is now nearing an area of congestion on the weekly charts. Between the start of January and the end of February 2017, the price of Brent traded in a tight $54.0/brl - $58.5/brl range before heading south and hitting $45/brl in mid-June. Oil also currently trades in overbought territory, according to stochastic indicator, and traders may be tempted to book profits after the recent 25% rally from June’s low.

Chart: Brent CrudeWeekly Time Frame (March 16, 2016 – September 22, 2017)

Please add a description for the image.

Chart by IG

--- Written by Nick Cawley, Analyst

To contact Nick, email him at

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.