November Crude Oil reversed course on Tuesday, September 26 2016, trading lower as conflict between Saudi Arabia and Iran dampened expectations for a freeze deal to emerge from Algeria. Saudi Arabia’s proposal to reduce their production to January levels (10.2 million barrels) while Iran freezes production at 3.6 million barrels was rejected by Iran as they repeated their intentions of regaining lost market share from US led sanctions.
Iran’s oil minister said they will not freeze production at current levels and they do not intend to enter into any agreement at the meeting on Wednesday. They are here only to consult and exchange views. This sent crude oil prices spiraling downward to the low of the day at 44.19. Crude Oil was able to recover from here as spin doctors went to work and laid the groundwork for continued headlines to tease that a deal is possible at the OPEC meeting in November.
The rally took price to 45.07 and then Crude waited for the API report, range trading between 44.76 and 44.29. It settled at 44.67. The API report showed crude oil inventories declining by 752,000 barrels. The market was looking for an increase of 2.8 million barrels.
Cushing, Oklahoma inventories fell 832,000 barrels and gasoline by a large 3.7 million barrels. Distillates fell by 343,000 barrels.
Crude jumped on the news, trading up t0 44.98 and it ended the day at 44.93. The EIA report will be released later today along with the actual informal OPEC – NOPEC meeting. If there is a surprise announcement and some sort of tentative agreement on a freeze is made, Crude Oil could stage a strong rally.
If the meeting ends in a whimper, Crude Oil may crash as traders punish OPEC for disappointing them. Then everyone will focus on the EIA report. Resistance is at 46.02 (TL), 46.23 (100 DMA), 47.30, and 48.12 (TL). Support is at 44.60 (50 DMA), 44.45 (TL), 43.42 (TL), 43.06 (9/20 Low), 41.29 (200 DMA).
- High 45.96
- Low 44.19
- Last 44.93
Daily Pivots for 9/28/16:
- R2 46.80
- R1 45.86
- PIVOT 45.03
- S1 44.09
- S2 43.26