Oil prices stabilized on Thursday, after declining notably two days earlier on the back of the updated forecasts from the International Energy Agency (IEA). The agency trimmed its global oil demand forecasts for this year as well as the next, and noted that the recent rally in prices will probably curb demand, casting a shadow on the narrative that the oil market is rebalancing itself faster than previously anticipated.
Looking ahead, the main event for the oil market will be the OPEC meeting on November 30, where producers are widely anticipated to extend the current deal by 9 months, to December 2018. Indeed, following myriads of optimistic remarks from various officials and ministers that an extension of the current deal is extremely likely, we think most, if not all, of the “good news” are already priced in. Heading into the meeting, the big question facing traders may be whether the producers will deliver something over and above what the market currently expects, such as a 12-month extension or deeper cuts in production. As such, we expect oil prices to be very much headline-driven over the next couple of weeks. Any hints from key officials that they could consider something more than a simple 9-month extension could keep prices supported. On the other hand, anything that places the prospect of such an extension in doubt could work against prices.
- WTI traded in a consolidative manner yesterday, oscillating around the key barrier of 55.30 (S1). The price is now trading fractionally above that hurdle, but appears ready to fall back below it. Something like that could initially aim for our next support of 54.00 (S2). The 55.30 (R1) level acted as the upper bound of the sideways range we’ve discussed several times in the past, which capped prior oil gains. As such, a dip below it would bring the price back within a neutral territory. The case for another leg down in WTI is also supported by our short-term oscillators. The RSI turned down again and appears ready to fall below its 30 line, while the MACD stands below both its zero and trigger lines.
That said, the price continues to trade above the upside support line taken from the low of the 31st of August, which still keeps the door open for a rebound in the foreseeable future, even if oil retreats a bit more within the aforementioned range.