Crude Oil

OPEC+ meeting preview: Will more production stall crude’s impressive rally?

Ahead of Thursday’s meeting, cracks are emerging in OPEC+’s united façade once more – what is going to that mean for the worth of crude?
Markets are starting the week off on a bullish note on the rear folks stimulus package hopes, with equities rising across the world , bond yields reversing Friday’s surge, and oil prices supported near their 14-month highs.

Crude oil are going to be particularly interesting for traders in the week before Thursday’s highly-anticipated OPEC+ meeting. After all, the cartel’s failure to succeed in an agreement was one among the first factors that drove oil prices into negative territory last April (I still have trouble believing this happened, nearly a year later!). then catastrophic development, coordination between Saudi Arabia and Russia increased, culminating during a nearly 9.7M b/d move production to stay prices supported.

Ahead of Thursday’s meeting, cracks are emerging in OPEC+’s united façade once more . Saudi Arabia reportedly wants to stay the present production cuts in situ until a minimum of April, while Russia and its allies are pushing for releasing another 1.5M b/d of supply onto the market. With oil prices testing 14-month highs and demand likely to extend as vaccine distribution accelerates across the developed world, there’s a compelling case for producers to release a minimum of some additional supply to satisfy incremental demand.

One other dynamic at play is that the unprecedented winter storm hitting the US state of Texas. Forced closures of drilling rigs have slashed about 4M b/d from US production and refining capacity over the last fortnight , though warmer weather is predicted to bring most of that production back online in the week . Nonetheless, this temporary disruption has contributed to surging oil prices and allowed other global producers (including OPEC+ countries) to draw down excess inventories. At the margin, last month’s shocking weather within the southern US could tilt OPEC toward increasing production later in the week .

WTI petroleum technical analysis

As we noted earlier, oil prices on each side of the Atlantic have surged in recent months on supply restrictions and optimism about the prospects for demand to select up throughout the year. Heading into in the week , West Texas Intermediate (WTI) crude is holding steady near a 14-month high near the highest of its 4-month bullish channel.

While the US oil blend remains during a healthy uptrend, there are some technical signs that a pullback could also be overdue, especially if OPEC+ opts to extend production by quite expected. Specifically, the contract’s 14-day RSI indicator is showing a bearish divergence, signaling declining buying pressure despite a marginal new high in price, as WTI approached previous resistance within the $63.00 area:

If this short-term bearish scenario plays out, WTI could pull back to check previously-reliable support at its 21-day EMA near $59.50, with an opportunity below there potentially exposing rock bottom of the established bullish channel near $58.00.

On the opposite hand, OPEC+ countries might be swayed by Saudi Arabia’s influence and hold off on production increases for an additional month. While not the foremost likely scenario in our view, it’s certainly within the range of outcomes and would likely cause a rush of shopping for pressure in WTI. If that plays out, it could drive WTI oil to a fresh 14-month high above $63.50 and open the door for a continuation up to the 2019 high near 2016.

Put simply, Thursday’s OPEC+ meeting could be the event that sets the trend for oil prices for weeks to return .

Two trades to watch FTSE, WTI crude oil

FTSE set to open higher on falling US treasury yields, US stimulus progress. WTI petroleum rises on economic recovery optimism, Iran news
FTSE jumps 1% on falling yields US stimulus progress

FTSE futures are pointing to a stronger start out of the blocks amid an upbeat mood within the market.

The FDA approval of the round Johnson & Johnson covid vaccine and therefore the House of Representatives passing the Biden administration’s $1.9 trillion stimulus package has overshadowed a drop by China’s factory output growth.

UK manufacturing PMI data for February is due later this morning. Expectations are for the ultimate revision to tick higher to 54.9 within the final reading up from 54.1.

Earnings in the week are due from big names like Taylor Wimpey, Persimmon, Fresnillo and Flutter Entertainment.

Where next for the FTSE?

The FTSE bounced off support of its ascending 3 month trendline of Friday and is extending the move higher before the ecu open.

Whilst it trades above its 100 sma on the daily chart remains below the 50 sma and therefore the RSI is additionally in bearish territory. Suggesting a mildly bearish bias. Although the bears would wish to interrupt through the trendline at 6460
Whilst the trendline holds, the bulls will look towards the 50 sma at 6600 with a move beyond here bringing 6700 last week’s high into focus. Past this level the bulls could gain momentum targeting 6810 the yearly high.

On the downside 6460 is offering strong support. this is often not only the trendline support but also a horizontal support which limited losses on several occasions across February.
WTI rises on economic recovery optimism & Iran news

US petroleum prices rose for a 5th straight month in February as investors still cheer the continued economic recovery and therefore the prospect of a vaccine led economic reopening.

On Friday the Baker Hughes total rig count rose by 4 after falling by 1 the previous week.

Attention will address this week’s OPEC+ meeting with chatter surrounding a production hike is increasing.

Iran rejects the EU’s invitation for nuclear deal talks.

Where next for WTI?

WTI trades within an ascending channel dating back to late January. It also trades above its 50 & 20 sma on the daily chart and therefore the RSI is supportive of further gains until it enters overbought territory.
The bulls would wish to push past the Doji candle formation at the 13-month high of $63.71 so as to focus on $65.90 the upper band of the ascending channel & high from 2019.

On the flip side immediate support are often seen at 6150 the lower band of the channel before $60.00 the key psychological level and $59.80 the 20 sma.