Crude Oil Analysis: WTI, Brent Bounce, OPEC+ Uncertainty Remains

Crude Oil Key Points

OPEC+ is struggling to reach an agreement to extend production cuts, leaving the oil market in flux.
Assuming we see an agreement this week, WTI and Brent prices could rally above $80 and $83 respectively.
While not the most likely scenario, a collapse in talks could take oil prices to multi-month lows.

Crude Oil Fundamental Analysis

The crude oil market is in flux. Of course, the outlook for every market is always uncertain, but the current backdrop for oil is particularly perplexing.

Against a backdrop of falling prices and fears about demand next year, the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) were poised to meet last weekend and discuss the potential for production cuts. However, the group was forced to delay the meeting to this Thursday to allow more time to resolve disagreements over output levels for African producers.

The signs of discontent extended this morning, with Reuters sources mentioning that the negotiations are difficult and that a further delay was possible, sending crude oil prices back below $75 despite general weakness in the US dollar.

Ultimately, the OPEC+’s power derives from its ability to act as a single bloc, increasing or decreasing production in unison to manage prices, so we would expect the group to reach an agreement to extend (if not outright expand) its recent production cuts to support prices later this week or the next. That said, the tail risks of a failure to reach an agreement is on the rise, presenting an underappreciated potential for even more volatility in the oil market.

Crude Oil Technical Analysis – WTI Daily Chart

Source: TradingView, StoneX

Turning our attention to the chart of West Texas Intermediate (WTI) crude oil, the US benchmark is testing the top of a 6-week bearish channel near 76.00 as we go to press. Oil prices appear to have found some semblance of support at previous-resistance-turned-support near 74.00, and if OPEC+ extends its production cuts this week, WTI could break out of its bearish channel and rally toward the 50-day EMA near $80.00 next.

Meanwhile, a break below 74.00 support would open the door for a continuation below $70.00 before encountering the next level of previous support near $67.00.

Crude Oil Technical Analysis – Brent Daily Chart

Source: TradingView, StoneX

Not surprisingly, the technical picture is similar for the Brent crude oil, the global benchmark. Brent has already broken out of its equivalent bearish channel, though prices have spent most of the last week consolidating in the lower-$80s. Looking ahead, any efforts to further restrict supply from OPEC+ could take Brent up through previous-support-turned-resistance at $83.00, whereas a failure to reach an agreement would be a bearish development that could drive prices to 5-month lows under $77.00.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.