Crude oil bounces back amid a more cautious OPEC+ guidance and threat of sanctions | investingLive

Fundamental
Overview

Crude oil looked set for a
rally into the 70.00 level last week after some key technical breakouts but eventually
dropped all the way back to the most recent low around the 61.45 level. The
catalysts were the Reuters
report saying that OPEC+ was set to hike output at the Sunday’s meeting
again, and then the soft
US data that threw in some economic slowdown fears.

The market positioned
bearish into the weekend in a classic “buy the rumour” move. Over the weekend,
OPEC+ hiked output by 137K bpd per month and said that adding the remainder of
the 1.66 million barrels of cuts will be contingent on “evolving market
conditions” and increases could even be reversed.

That helped the market as
oil prices bounced back on the more cautious OPEC+ guidance and the “sell the
fact” trade. Moreover, there are some fears that new sanctions on Russia could
lift prices further, although in the bigger picture sanctions generally have
limited impact on prices due to shadow markets and market flexibility. In the
short-term though, they could give prices a boost. Fed rate cuts could also help spurring growth and switch the market focus towards higher future demand.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil looked like it was breaking out last week with the price probing
above the trendline
and the 64.00 zone, but eventually it turned out to be a fakeout following the
reports of potential OPEC+ output hike and then the weaker US data. The price dropped
all the way back to the most recent low at 61.45 where it bounced as the market
“bought the fact” on the OPEC+ hike.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is now approaching the key 64.00 zone again. This is where
we can expect the sellers to step in with a defined risk above the zone to
position for a drop into new lows. The buyers, on the other hand, will look for
a break higher to increase the bullish bets into the 66.00 handle next.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline with a
defined risk below it to keep pushing into new highs, while the sellers will
look for a break lower to pile in for a drop into the 61.45 low. The break might also just provide a pullback for the buyers to enter at better prices and not necessarily lead to new lows. The red lines
define the average daily range for today.

Upcoming
Catalysts

On Wednesday we have the US PPI report. On Thursday, we get the US
CPI report and the latest US Jobless Claims figures. On Friday, we conclude the
week with the University of Michigan Consumer Sentiment report.