Crude oil managed to find some bullish momentum last week largely as a follow through to the OPEC meeting which announced it would be cutting output from its members to between 32.5 and 33.0 million barrels per day, from the current 33.5 million barrels per day, with the details to be agreed at the next meeting in November. That said, the current glut of oversupply in the market is likely to cap any longer term trend higher for oil. Furthermore, until the combined effects of reducing supply, absorption of supply, along with a pick up in the economic outlook globally, the price of oil looks set to remain under pressure. It will also be interesting to see whether OPEC do indeed cut in November, and if so by how much, and in doing so may be creating a volatile reaction in the market should any move be seen as indecisive by oil markets, in much the same way as the fx markets have reacted to the stimulus from the Bank of Japan.
From a technical perspective it is interesting to note last week’s price action, with rising prices but falling volume as the WTI contract returned to test resistance in the $48.50 per barrel area at time of writing. Should this level be taken out we may see a further move higher to test the psychological $50 per barrel area in due course, with the volume point of control at $47.20 per barrel providing support to the move. The trend monitor has also transitioned on the daily chart and confirming the current bullish trend for oil. However, much will depend on the next OPEC meeting which is now on the horizon.
By Anna Coulling