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Crude Oil Analysis: Death Cross Reaffirms Bearish Outlook

Crude Oil Analysis: Death Cross Reaffirms Bearish Outlook

2018-11-23 10:30:00
Justin McQueen, Analyst

Oil Price Analysis and News

  • Brent Crude Testing Fresh 2018 Lows
  • Technical Outlook Suggests More Pain is in Store

For a more in-depth analysis on Oil Prices, check out the Q4 Forecast for Oil

Brent Crude Testing Fresh 2018 Lows

Oil bears are firmly in control with prices heading for a 7th weekly loss. This morning has seen Brent crude prices test the 2018 lows ($61.67), which is despite the expectations that OPEC will announce their pledge to cut oil production at the Bi-Annual meeting on December 6th. But as I have mentioned previously, the oil market is not convinced by OPEC’s strategy in believing that it will prevent oversupply, with down over 16% since the beginning of November. Russia who have been somewhat coy so far, have given little in the way to suggest that they will be involved in the potential OPEC led cuts.

However, everyone has their price, and with the slide in oil showing little signs of abating, a move below $60 looks to be on the cards. This in turn should begin to prompt increased talk that Russia could join OPEC in oil curbs, particularly as oil moves towards $60, which has been the lowest price cited by President Putin as suitable for Russia’s budget. For oil cuts to have a more profound effect in stabilizing oil prices, Russia’s involvement would be needed and given the persistent slide in oil, it is likely that Russia will ultimately participate.

Technical Outlook Suggests More Pain is in Store

While the overall outlook and sentiment remains weak, we don’t rule the risk of a corrective moves higher, particularly as OPEC jawboning to prop up prices increases ahead of the OPEC meeting. Alongside this, Brent oil forward curves, which are sitting comfortably in contango, have pulled off contract lows in the front month (now -$0.25 from -$0.39). Although, if indeed there are corrective moves higher, this may provide an opportunity for bears to reload shorts, as evidenced by the RSI indicator consistently hovering in oversold territory. The Brent crude chart shows that more pain is in store as we are on the verge of forming a “death cross” as the 50DMA looks to break below the 200DMA.


What Traders Need to Know When Trading the Oil Market

Important Difference Between WTI and Brent

OIL PRICE CHART: Daily Time-Frame (Dec 2015-Nov 2018)

Crude Oil Analysis: Death Cross Reaffirms Bearish Outlook

Chart by IG

Brent crude prices have respected the 2018 low at $61.67, however, another test seems imminent, whereby a close below sets Brent on course to make a move towards the $60/bbl mark. Based on IG client sentiment, the ratio of traders long to short is at 5.12 to 1.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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