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Oil Price Forecast: Bearish Momentum Abates Ahead of G20 Summit

Oil Price Forecast: Bearish Momentum Abates Ahead of G20 Summit

David Song,
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Oil Price Talking Points

The price of oil climbs to a fresh monthly-high ($57.37) ahead of the Group of 20 (G20) Summit, with crude at risk of staging a larger recovery as the bearish momentum abates.

Oil Price Forecast: Bearish Momentum Abates Ahead of G20 Summit

Oil extends the advance following the 3106K contraction in US Crude Inventories, with the price of crude breaking out of a narrow range, and developments coming out of the G20 Summit may keep energy prices afloat as US President Donald Trump is scheduled to meet with China President Xi Jinping.

It remains to be seen if the US and China, the two largest consumers of oil, will reach a trade agreement as the Trump administration relies of tariffs to push its agenda, but efforts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies may help to stave off a bear market as the group appears to be in no rush to boost production.

Image of OPEC meeting

Recent comments coming out of Russia suggest the region will continue to push for higher oil prices as Lukoil CEO Vagit Alekperov insists that “the OPEC+ agreement should exist permanently,” and the alliance may keep crude afloat ahead of the Joint Ministerial Monitoring Committee (JMMC) on July 1 especially as RussiaPresident Vladimir Putin notes that “$60-65 a barrel suits us just fine.”

With that said, crude may stage a larger rebound ahead of the G20 Summit, and efforts by OPEC and its allies may keep crude prices afloat if the group continues to curb production in the second half of 2019.

Crude Oil Daily Chart

Image of oil daily chart
  • Keep in mind, the broader outlook for crude is no longer constructive as both price and the Relative Strength Index (RSI) snap the bullish trends from earlier this year.
  • May see a ‘death cross’ formation take shape over the coming days as the 50-Day SMA ($59.53) approaches the 200-Day SMA ($59.05), with both moving averages tracking a negative slope.
  • However, recent price action raises the risk for a larger rebound as crude breaks out of a narrow range and carves a series of higher highs & lows after failing to test the monthly-low ($50.60).
  • The RSI highlights a similar dynamic as the oscillator bounces back from oversold territory and snaps the bearish formation carried over from late-April.
  • The move above $57.40 (61.8% retracement) brings the Fibonacci overlap around $59.00 (61.8% retracement) to $59.70 (50% retracement) on the radar, with the next region of interest coming in around $62.70 (61.8% retracement).

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For more in-depth analysis, check out the 2Q 2019 Forecast for Oil

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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