Last week, Crude Oil tumbled despite the huge decline in the US Crude Oil Inventories, which posted the biggest weekly decline since September of last year. Crude Oil prices ignored these figures and continued to decline further.
Brent touched $50, and WTI slid to 46.50’s. Some OPEC reports came out, and that led to a notable rally. Brent closed the week higher by more than 3% on Friday, and WTI added around 2%.
So What’s Happened?
As we noted many times before, OPEC was on radio silence until the price of Brent started to slide below the $50, which is now seen as a key support.
They came back to the market with some remarks, increasing the hopes for new measures in the coming weeks/months.
OPEC said that the commitment ratio is now around 95%, which makes more sense than the previous ratio when it was over 100%, as OPEC production has been rising for the past three months.
OPEC also noted that they would meet in November, and in this meeting, they will decide on either to continue with the current deal or to stop it.
Why would they stop the deal right now or even in November, while the prices are still nearing this year’s lows? No one knows, but it’s an attempt to keep the markets wondering what might happen in November.
Keep An Eye on Brent At $50
As noted before, the $50 represents a solid and key support for the market and for the producers at the same time.
Since the beginning of this week, Brent has been trading within a tight range, between 53 and 50 with no clear break above or below those levels.
At the same time, traders need to keep an eye on the daily trend line as shown on the chart above, which stands around 51.0, as a break of which would clear the way for further declines, probably toward 50.50 first followed by 50.0 and 49.70’s.
The technical indicators are already crossed over to the downside, which keeps a high possibility for another leg lower ahead.
The only thing that might change such bearish view is a clear breakout above the $53 resistance area, with a clear daily close above that resistance. This is the invalidation scenario of the current bearish outlook.
WTI Trading Around The Trend line
The West Texas Crude has almost the same scenario of Brent. However, it is trading right below the tight range of last week.
In addition, it is still hovering around its daily trend line since the beginning of the week, with no clear break until this report is released.
In the meantime, eyes are on the US Crude Oil Inventories. Today, the estimates point to a decline of 3.5M barrels last week that would be the eighth weekly decline in a row, which is the longest declining stake since the beginning of this year.
Yet, don’t count for a notable decline in inventories. This is exactly what happened last week. The inventories declined by more than 9 million barrels last week, and Crude Oil failed to react to such news.
If nine million barrels failed to lift the prices, why would a three million barrels do so? I don’t think so, unless the numbers come in with a surprise.
On a final note, the bearish outlook for WTI remains unchanged as long as it continues to trade below last week’s highs around 50.50.
by Nour Eldeen Al-Hammoury, Orbex
Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.