Crude Oil Outlook: OPEC+ Expected to Continue Constrained Output

CRUDE OIL (CLc1) ANALYSIS

• OPEC+ meeting
• Chinese PMI (MAR)
• Economic data announcements

CRUDE OIL FUNDAMENTAL BACKDROP

The Organization of the Petroleum Exporting Countries (OPEC) as well as their associated producers known as OPEC+ has been curbing output of recent in order to decrease oversupply in the market. Today OPEC+ will discuss this current trajectory which is expected to remain in place despite the United States imploring the group to consider the consumer perspective in terms of affordability.

Other crude price influencers this week have been the headlined blockage at the Suez Canal as well as the resurgent COVID-19 virus in major nations. These two factors have had a short-term impact on supply and demand. Although the Suez Canal is now fully operational, the COVID-19 situation may have longer lasting effects with diminished demand in the medium-term.

Chart prepared by Warren Venketas, Refinitiv

The strengthening U.S. Dollar (green) has added additional pressure onto oil prices as U.S. Treasury yields have ballooned which gives OPEC+ greater incentive to extend current restrictions, while an uptick in Chinese NBS Manufacturing PMI (white) for March to 51.9 is bullish for short-term crude oil prices.

The middle pane on the graph above shows the increase in crude oil stocks which may be offset by a potential rollover by OPEC+ to steady prices.

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CRUDE OIL ECONOMIC CALENDAR

Several key announcements are scheduled for this week with NFP on Friday. U.S. Manufacturing PMI may have a greater effect on crude prices should actual figures deviate significantly from forecasts. Expect some dollar volatility pre and post-announcements which could have a knock-on effect on dollar based commodities.

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

US CRUDE WTI (CLc1) DAILY CHART

Chart prepared by Warren Venketas, IG

The daily US Crude chart above shows the slump in oil prices after March highs which has consolidated somewhat in the last week. The downward sloping trendline (black) has been tested on two occasions with bulls being unable to push above. The 76.4% Fibonacci at $60.39 (Fibonacci taken from October 2018 high to April 2020 low) has held as resistance yesterday and today which could mean further downside to come. This bearish bias may be supported by a candle close below the bear flag (yellow) support line. Should this unfold, initial support target will come from the $57.26 swing low.

From the bullish perspective, a break above trendline resistance (black) may see bulls consider bullish set-ups.

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US CRUDE WTI: KEY TECHNICAL POINTS TO CONSIDER

• Trendline resistance
• Bear flag
• $57.26 support

IG CLIENT SENTIMENT SUPPORTIVE OF SHORT-TERM BEARISH BIAS

IGCS shows retail traders are marginally net long on Crude Oil, with 63% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment, and the fact traders are net-long is suggestive of a bearish partiality.

--- Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas