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Crude Hold Above 2019-Low as OPEC Pledges to Stabilize Oil Prices

Crude Hold Above 2019-Low as OPEC Pledges to Stabilize Oil Prices

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Oil Price Talking Points

The price of oil has bounded back ahead of the 2019-low ($50.52) as the Organization of the Petroleum Exporting Countries (OPEC) mull additional steps to balance the energy market, but crude faces a renewed risk of a bear market especially as the Relative Strength Index (RSI) snaps the upward trend from earlier this year.

Crude Holds Above 2019-Low as OPEC Pledges to Stabilize Oil Prices

Oil attempts to pare the decline from the previous week as Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, insists that “everybody agrees in OPEC that we need to stabilize the market” during an interview with Bloomberg News.

Mr. Sylva goes onto say that “we cannot allow prices just to plummet” as the crude slips to a monthly low of $50.99, and OPEC and its allies may come under increased pressure to shore up oil prices as the most recent Monthly Oil Market Report (MOMR) warns of lower consumption in 2019.

Image of EIA weekly US field production of crude oil

At the same time, fresh updates from the US Energy Information Administration shows weekly field production holding near the record-high, with crude output sitting at 12,400K in the week ending September 27, and it remains to be seen if OPEC+ will make a major announcement ahead of its next meeting on December 6 as the US and China, the two largest consumers of oil, struggle to reach a trade deal.

With that said, the weakening outlook for global growth may push OPEC and its allies to cap production beyond 2019, but oil prices face a renewed risk of a bear market, with recent developments in the Relative Strength Index (RSI) bringing the downside targets on the radar as the oscillator snaps the bullish formation from earlier this year.

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Crude Oil Daily Chart

Image of crude oil daily chart

Source: Trading View

  • The broader outlook for crude oil remains tilted to the downside as a ‘death-cross’ formation took shape in July, with recent developments in the Relative Strength Index (RSI) offering a bearish signal as the oscillator snaps the upward trend from June.
  • However, the flattening slopes in the 50-Day ($55.67) and 200-Day SMA ($56.60) warn of range-bound conditions as the moving averages converge with one another, with the price of oil bouncing back ahead of the 2019-low ($50.52).
  • In turn, the lack of momentum to break/close below the Fibonacci overlap around $51.40 (50% retracement) to $51.80 (50% expansion) raises the risk for a move back towards the $54.90 (61.8% expansion) to $55.60 (61.8% retracement) region, with the next area of interest coming in around $57.40 (61.8% retracement).

For more in-depth analysis, check out the 4Q 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.