Oil Weekly Summary 19th – 23rd Dec 2016

Summary:

Oil prices extends higher Monday morning in anticipation of tighter crude supply going into 2017 following the decision by OPEC and other producers to cut output to prop up prices.

OPEC and other producers led by Russia have announced cutbacks of almost 1.8 million barrels per day in oil production from January 2017 in an effort to bolster prices to reduce rampant global oversupply which has seen output outstrip consumption for over two years.

With investors now expecting a relatively high level of compliance with the production cut agreements, prices should be well supported heading into next year’s trading. A slowdown in US Dollar rally last few days also helped improve investor sentiment. Major swings in the US Dollar could affect oil demand as they influence fuel prices for any country using its own currency domestically.

On the flip-side, some market analysts remain skeptical that the OPEC-led cuts will reduce oil supply by as much as some are hoping. They believe it is unlikely that OPEC will implement the cuts in full, while non-OPEC production will likely increase.

Furthermore, Chinese imports could fall back if prices remain high as much of the surge in oil imports has been driven by a desire to fill the country’s strategic reserves.

Going into trading this morning, Brent crude futures were trading at $55.41 per barrel (up 20 cents, or 0.36 percent), WTi crude futures were trading at $52.12 per barrel (up 22 cents, or 0.42 percent) from Friday’s close.

Source:

https://www.ft.com/content/32cce5ac-c3ae-11e6-9bca-2b93a6856354?ftcamp=published_links%2Frss%2Fhome_us%2Ffeed%2F%2Fproduct
http://www.marketwatch.com/story/oil-prices-start-the-new-week-with-gains-and-a-focus-on-production-cuts-2016-12-19?mod=markets_twitter_new&link=sfmw_tw

Technical Analysis

Brent Hourly Chart

Brent just broke through trend line on the hourly chart and price action clearly show that bulls are in control.For an aggressive entry, I'd look to go long on 55 psych and 38.2% Fib level.For conservative entry, I'd wait for price to retrace from current level to DM2 which is also the 61.8% Fib level and Role reversal area.Target : DM4

WTi Hourly Chart

Price action on WTi is very similar to Brent where the price just broke through down trend line to the upside on the hourly chart.For an aggressive entry, I'd look to go long on 52 psych level with target of DR3.For conservative entry, I'd wait for price to retrace from current level to DM2 which is also the 61.8% Fib level and Role reversal area.

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