• Crude prices are ever-more volatile, presenting a challenge for OPEC to stabilize the market.
  • The supply and easing global growth are continuing to raise the volatility over the near and medium term.
  • The overall near-term trend is difficult to forecast, though Brent appears better placed above Nov low, whereas WTI closed below Nov low.

Since October high Oil prices have fallen more than 30.0%, Brent tumbled to 57.80$ from peak 86.60$ in just seven weeks.

Technically, the 200MA (weekly) has been offering decent support over a year. Back in July 2014, Brent oil broke the 200MA (weekly) and spent nearly three and half years below that particular moving average.

Now again the price back to that MAs. We can see the same story on the monthly chart as well with 50MA.

What to expect is hard to predict at the current given market conditions. As the commodity market continues to experience high volatility as usual into the year-end, the lower level buying is drying up as global growth concerns multiples.

Whenever global growth eases, commodity market volatility has the potential to change the landscape quickly.

However, International Energy Agency (IEA) kept its 2018 and 2019 oil demand unchanged at 1.3 mb/d and 1.4mb/d respectively. The Paris-based agency also said, “Time will tell how effective the new production agreement will be in re-balancing the oil market.”

The IEA monthly Oil Market report ended with “The next meeting of the Vienna Agreement countries takes place in April, and we hope that the intervening period is less volatile than has recently been the case.”.

Bringing the 200MA (Weekly) back to the picture, currently, it is sitting at 56.50$, and the Brent price is trading at 58.75$ levels. The daily volatility and the bullish turnaround of the daily oscillator should apply the brakes around that particular MA.

A weekly close below of the particular MA and 50MA (Month) sounds tricky, and we instead see a decline to the next supports at the prior swing low at 50.75$ its Jan 2017 low and the 61.8% fib reaction of 27.00$-86.60$ rally finds at 50.00/49.70$.

The flip side, resistance stand at 60.00$, 61.20$ and 62.00$. Note that a break above 62.00$ would underpin the baby bullish momentum, paying the way to 63.75$. A successful foot above 63.75$ could trigger a sharp near-term rally 68.50/70.00$.

We still forecast a limited “downward approach.”  Brent oil might have put in a meaningful bottom between 56.00$-50.00$ and could consolidate sideways for few days.  

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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