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Talking Points:
- Crude Oil Technical Strategy: Strong Dollar & Clear Support In Focus To Resume Downtrend
- OPEC Production Cut Deal Comes Down To the Wire, Crude Down ~3.5% On Session
- Deal Rejection Could Lead To Long Winter For Oil Market
We’re less than 24-hours to go before the Concluding Press Conference in Vienna where OPEC is said to agree or disagree on a united production cut formally, and it’s not looking good for those hoping for a deal. While some maintain that a cut is the default outcome, the details and follow-through have always been a concern.
On Tuesday morning, we see that multiple sides are playing hardball in that Saudi is willing to walk away if Iraq & Iran is unwilling to join the cut, which looks to be the case heading into the final day of negotiations. Reuters reported an OPEC Source that said Iran had proposed in a letter to OPEC that Saudi cut oil output to 9.5mln bpd, which is nearly three times what Saudi previously mentioned they were willing to cut.
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The added significance of the request is that the entire production cut deal was originally geared at having OPEC agree in unison to cut ~1mln bpd. Now, Saudi is being asked by the same countries that are seen by them as holding up the deal to roughly carry the entire cut. Such a request in the final hours seems to argue that a deal is becoming more and more unlikely by the hour.
D1Crude Oil Price Chart: USOIL Advance Is Rejected At Ichimoku Cloud / Fibonacci Zone Resistance
Chart Created by Tyler Yell, CMT Courtesy of TradingView
The price of Crude Oil (CFD:USOil) or CL1 has been rejected by the topmark of our pre-defined resistance zone at $48.19/bbl. This predefined level marks the 61.8% Fibonacci Retracement of the October-November Range as well as the Ichimoku Cloud.
Per the recent Commitment of Traders data, we saw that long Brent exposure increased by its most in 7-weeks last week by Hedge Funds. You could easily extrapolate this to show much of the recent bounce higher into resistance, which could easily wash out and bring a subsequent break through support if no deal develops and the recent longs jump ship.
With all the volatility, we continue to keep an eye on the Trendline drawn off the first higherlow in early April should a breakdown occur on no-deal. If the bullish environment remains, and the price continues above this trendline, we’ll be on the watch for further upside. Another component that could help the price of Oil stay above the trendline is the pull-back in the Dollar Index that we’ve seen into month-end flows.
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In addition to the Fibonacci resistance zone that occupies $45.90-$48.19/bbl, we also see the top of the Andrew’s Pitchfork that should still be respected until price definitively uses the top of the channel (declining upper red line) as support for a move higher. The support zone worth watching is $43/42 per barrel. A break below this important zone that houses the post-election low and Trendline could indicate the risk of a double-top is upon us. The absolute double-top target would be near the February low around ~$26bl. However, the initial focus would be on a 61.8% extension below the neckline toward $35bl, which is highlighted on the chart.
Either way, we have the zones to watch regardless of how price breaks.
Key Levels Over the Next 48-hrs of Trading as of Tuesday, November 28,2016
T.Y.
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