Oil rebounds, expect a cautious stance from OPEC+

Oil rebounds after Friday's selloff looks overdone. OPEC+ meeting on Wednesday & Thursday could see the oil cartel adopt a cautious approach.

Energy 3

Selloff overdone

After tanking over 13% on Friday oil is rebounding on Monday, trading almost 5% higher at the time of writing. Friday’s Omicron inspired selloff looks rather overdone, particularly given that not much is known about the new covid strain. 

Omicron risk 

Over the weekend the World Health Organization said that it would take time to understand the severity of the newly discovered, highly mutated covid strain. However, anecdotal evidence from South Africa suggest that it could be more contagious but less severe, which is helping to lift risk sentiment in the market. That said it is still very early days and governments across the globe are tightening travel restrictions as a pre-caution. 

Strategic reserves release 

The latest injection of volatility into the oil markets comes after the announcement of a US led a coordinated release of strategic oil reserves earlier this month. The release of such reserves could be unnecessary should the Omicron variant result in more mobility restrictions. A combination of more supply entering the market combined with a clouding demand outlook could see oil prices struggling to gain from here. 

OPEC+ meeting 

OPEC+ are due to meet this week on Wednesday and Thursday to decide whether to enact the planned 400,000 barrel per day increase in the face of the planned release of strategic reserves and rising covid risks.  The technical meeting has been postponed in order to have more time to assess Omicron’s impact on demand. 

The group is expected to adopt a cautious stance with demand likely to weaken over the coming winter months. OPEC have already warned of a potential supply glut next year, even before the Omicron discovery. Hopes that OPEC+ could pause the planned increase in production is helping to boost the price. 

Learn more about trading oil 

Where next for WTI oil prices? 

WTI oil is attempting a solid rebound from Friday’s low of $67.31, retaking its 200 sma at $69.75. A daily close above here would support the bulls case. However, the RSI remains firmly in bearish territory supporting the case of further downside. 

Any meaningful recovery needs to retake the 72.00 today’s high in order to expose the 100 sma at 74.00. 

Meanwhile sellers will be looking for a move below 70.00 round number to test the 200 sma again at 69.70. 

 

 

 

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

 

Disclaimer: 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 and commodity futures, 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 GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.