Chapter 26 News Dominates and Leads to A More Oscillating Oil Price(11.23)
Fundamentals
During Thursday's (Nov. 23) Asian session, WTI crude oil oscillated at lows, and it is currently trading at 76.1 dollars/bbl. Yesterday, oil prices moved with an oscillating trend. During the first half of the night, oil prices dropped rapidly because OPEC + postponed the meeting. A few days ago, due to the market speculation on the cancelation of this meeting, oil prices rebounded sharply to 78.5, and now the news about quitting has been released, adding more doubts to the market about the production cuts. Besides, the shorts are also seizing the opportunity to suppress the oil price, and yesterday, oil prices fell to 73.8 but rebounded in the second half of the night, recovering most of the decline. The reason was, on the one hand, the profits-taking orders appeared. On the other hand, sources from the OPEC+ said that Russia and Saudi Arabia reached an agreement on the postponement because there are still problems to be solved in small oil-producing countries in Africa. This news largely dispelled the market doubt about the internal disagreements in OPEC+ regarding the production cuts. That's crude oil! For several times, it was driven by news and fluctuations are too large to be thought of. The situation can be turned completely in just one minute, giving so much trouble to investors. Therefore, paranoid investors will lose unless they are billionaires, in this case, we are just nothing! Now, we should know that the trade is not dominated by us, and we should be good followers, a follower of the trend. Of course, we must establish a set of systems to follow the oil price trend. In the short term, oil prices will be determined by the OPEC+ meeting, which is currently postponed to November 30. Although some small oil-producing countries have not compromised, the original date can be modified easily, suggesting an internal divergence situation. It also shows that Saudi Arabia is unlikely to unilaterally sacrifice production for other oil producers. At the end of this month, if it fails to reach an agreement, the Saudis will probably stop cutting production, which is the best result for the U.S. until the oil price declines to an unsustainable level. At present, investors should focus on the meeting result next Thursday.
News: Saudi Arabia and its oil allies are in trouble regarding the dispute over production quotas for African members, which has forced the organization to postpone a major meeting. Meanwhile, the meeting, originally scheduled for this weekend, was pushed back four days to Nov. 30.
Inventories: U.S. EIA crude oil inventories were 8.7 million barrels for the week to Nov. 17, compared with expectations of 1.16 million barrels and the previous reading of 3.592 million barrels. Cushing, Oklahoma crude oil stocks were 858,000 barrels, while the previous number was 1.925 million barrels. Refined Oil Inventories were -1.018 million barrels, compared with an expected number of -761,000 barrels, and a previous reading of -1.422 million barrels. Gasoline inventories were 750,000 barrels, while the expected reading should be -150,000 barrels, and the previous reading was -1.54 million barrels. U.S. commercial crude oil imports (excluding SPR) were 6.529 million bpd, up 156,000 bpd from the previous week.
Today's focus: No heavy data, and the main task is to consume the stocks. In addition, investors should focus on next Thursday's OPEC+ meeting for related news and results.
Technical Analysis
A deep V-shape rebound emerged in yesterday's oil prices. After plummeting to 73.8, oil prices rebounded rapidly and covered most losses. Then, oil prices closed lower with a long-lower-shadow. Technically, the candlestick chart is suppressed under the 60-day SMA in the 1H chart, and a retracement showed up to reflect a weak pattern. Nevertheless, the candlestick chart in the 4H chart is oscillating above the 60-day SMA and failing to display a weak/strong trend. Furthermore, the MACD shows a golden cross in the daily chart, and it explains that WTI crude oil will rebound after a depreciation. Now, investors should focus on the support at the double-bottom of 7235-73.5. If WTI crude oil declines and reaches this area, aggressive investors should go long with small positions.
Trading Recommendations
Trading direction: Long
Entry price: 72.500
Target price: 76.000
Stop loss: 72.000
Support: 72.500/70.000
Resistance: 78.500/80.000
