Ministers from OPEC and non-OPEC countries agreed on last Thursday (May 25) to extend existing production cuts for a further nine months to the end of March 2018. Oil prices plunge nearly 5% even after OPEC extended output cut. market participants were disappointed over the extension of the cut as they are expecting a deeper cut. After OPEC output cut decision, focus shifts to inventories.

The reduction was nearly 1.8M barrels per day, equivalent to about 2% of global oil production, according to BBC.

Following big sell off on last Thursday, oil prices rebounds more than 1.5% on Friday and finally ended the weed with 3.5% losses. On the brand new week trading activity was quiet to public holidays in U.S, UK and China. On a thin trading session, Brent rejected at 100DEMA.

CFTC leveraged positioning data for the week ending 23 May 2017 reveals, “Net long crude oil and gold positions picked up after four consecutive weeks of net selling”.

The speculators raised its combined futures and options position in New York and London by 37,182 contracts to 221,495 during the period, the U.S. Commodity Futures Trading Commission (CFTC) said, reported by Reuters.

 TECHNICAL VIEW

Review: OPEC cuts fail to impress the investors, as a result Oil prices rejected at 80.0% of the previous fall (April- early May).  On our last week Tuesday article (May 23), we forecast resistance moved to 54.30-54.50, it made a high at 54.55 and spin-off.

Forecast:

For the trading purpose, support finds at 52 and 51.80, selling pressure looms below 51.70 for 51.20/51 and 50.80. Resistance seems between 52.60, 53 and 53.50$.

The parallel support zone remains between 50.80 and 50.40, last week low was 50.60 and rebounds. Falls below 50.40, further selling pressure accelerates again for 50$ and 49.50$.

Over the medium term, potential support finds at 48.50 if 49.50 erases. The daily RSI and oscillators remain bearish but in the four-hour chart, they are bullish. Over near term upside likely to cap between 52.90-53.50 levels.

NUTSHELL: Wait for a dip to buy.

 

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

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