November crude oil saw some follow through to the upside on Thursday, September 29, 2016. It traded past trendline resistance (48.04), reaching a high of 48.32 and then retreating below the trendline and settling at 47.83. Crude oil drifted after settlement and ended the session at 47.72.
Crude oil broke above trendline resistance (46.04) on Wednesday and closed solidly above it, when OPEC surprised traders with a tentative agreement (from the meeting in Algeria) to reduce production to between 32.5 million bpd and 33 million bpd from the current level of 33.24 million bpd after their semi-annual meeting at the end of November.
The current production levels are at all-time highs. This is awesome. OPEC did it! They caused a strong rally in crude oil without actually doing anything, agreeing to come to an agreement at the end of November, stating a level of cuts that is only 240,000 bpd lower than current production at the high end of the range.
Amazing! The production cap is just short of all-time highs and is set at a level that was hit just once before in 2008. To top it off, Iran, Nigeria and Libya were given exemptions. They will be able to produce as much oil as they can. This means there must be cuts from other countries.
The obvious producer to cut is Saudi Arabia. They must be desperate if they are willing to agree to this. Iran gets everything they could ever ask for… more market share, no cuts and cuts from Saudi Arabia. What a win for them.
Russia isn’t even a party to the so called agreement. They can do whatever they want to do. They could be given an invitation to join the agreement at the official OPEC meeting at the end of November. What an honor. Production quotas are to be decided at the meeting. There are already disagreements on how they will calculate production. The agreement is only a day old and they are already having disagreements.
This however plays perfectly into the objective. Keep producing, yet somehow scare the market into biding up price. Perfect. Every time the market declines more than they would like for the next 2 months, OPEC can come up with some sort of production cut statement to turn the market around.
Wow! Trendline resistance is at 47.99, a break of the trendline and crude oil could test resistance at 48.55, 49.36, 50.54, and 51.67. A failure from the trendline could see support tested at 46.33, 45.82, 45.31, 44.74 and 43.66.
High 48.32
Low 46.60
Last 44.93
Daily Pivot Points for 9/30/16
R2 49.27
R1 48.49
PIVOT 47.55
S1 46.77
S2 45.83