Oil looks frothy post the unofficial OPEC meeting on Friday, but Brent is very overbought in the short-term.
It was all about the informal OPEC/Non-OPEC meeting in Vienna on Friday, as the grouping expressed satisfaction at the results of the production cut agreement. Compliance in general, seems high and global inventories are substantially lower than a year ago. No decisions were taken on extending the deal past Q1 in 2018 or indeed, increasing the size of the cut. Nor were Libya and Nigeria bought into the fold on an official basis. These decisions all being left for the formal meeting in November.
Oil reacted positively though, with WTI roughly unchanged at the top of its recent range at 50.20 and Brent gaining 50 cents to finish the week at 56.60. With a stronger dollar starting the week, both contracts are trading unchanged in early Asia.
Brent spot continues to trade the more confident of the two contracts, now gradually eroding the long-term resistance regions at 56.50/57.00, supported by a gleeful OPEC and backwardation in the prompt futures. Some caution may be warranted though as Brent’s daily relative strength index (RSI) has entered the seriously overbought territory. This suggests that some multi-day consolidation at these levels or perhaps a downward correction may be required before catching its breath for another run at the upside.
WTI spot trades at 50.20 this morning just below near-term resistance at 50.30. Above here resistance appears close by at 50.60 with a break opening up 51.70. The downside is for now, well supported by the 200-day moving average at 49.30 which has held all pullbacks over the last seven sessions.
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