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Crude Oil Prices Risk Larger Recovery on Stagnant Non-OPEC Supply

Crude Oil Prices Risk Larger Recovery on Stagnant Non-OPEC Supply

David Song, Strategist
Oil Price Chart

Fundamental Forecast for Crude Oil: Bullish

Crude Oil Talking Points

Oil prices may continue to catch a bid as the Organization of the Petroleum Exporting Countries (OPEC) remain committed in rebalancing the energy market, and recent price action keeps the topside targets on the radar for crude as it takes out the December-high ($54.55).

Looking for a technical perspective on the Crude Oil? Check out the Weekly Crude Oil Technical Forecast.

Fresh comments from Saudi Arabia Energy Minister Khalid Al-Falih suggest OPEC and its allies will continue to curb production even as the U.S. imposes sanctions against Petróleos de Venezuela, S.A. (PDV S.A.) as the region pledges to reduce output ‘well below the voluntary cap’ during the proposed six-month period.

Crude Oil Chart

The efforts to defend oil prices may continue to bear fruit as updates from the U.S. Energy Information Administration (EIA) show weekly field production holding steady at 11,900K during the week ending on January 25, and the limited threat of non-OPEC supply should keep crude afloat especially as Russia Minister of Energy, Alexander Novak ¸ endorses a price range of $55-65bbl.

With that said, OPEC and its allies may continue to push for higher oil prices ahead of the next meeting in April, and the current environment may fuel the rebound from the December-low ($42.36) as an inverse head-and-shoulders takes shape. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

CL1 Daily Chart

CL1 Daily Chart

Crude may stage a larger recovery over the coming days as it clears the December-high ($54.55), but need a close above the $55.10 (61.8% expansion) to $55.60 (61.8% retracement) region to open up the $57.40 (61.8% retracement) area.

Next region of interest comes in around $59.00 (61.8% retracement) to $59.70 (50% retracement) followed by the Fibonacci overlap around $62.70 (61.8% retracement) to $63.70 (38.2% retracement). Will keep a close eye on the Relative Strength Index (RSI) as it approaches overbought territory, with a break above 70 raising the risk for higher crude oil prices.

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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