Oil prices recover amid OPEC speculations and trade concerns

Oil prices recover after last week’s fast fall following OPEC production cut speculations. US-China trade deal also weighs in.

December 04, 2019 | AtoZ Markets – Oil prices are currently recovering after last week fast dips. OPEC meetings are about to start and so speculations are very high. The oil market volatility since the end of November is therefore high. WTI oil started with a 7% rally to $58.6 per barrel between November 20 and 21. After a bit of stability, prices fell and WTI crude hit $55 to start December. Friday’s fall was as a result of rumours that OPEC would decline to deepen the production cut as earlier expected. However, the dip that followed was limited at $55 and WTI is currently recovering to $57. The Brent crude also recovers to $63 from $61 per barrel. However, the details of how OPEC approaches the stimulus plan to control Oil glut will be the major driver as 2019 Q4 ends. The meeting in Vienna later this week is therefore crucial.

OPEC meets with its allies in Vienna. Will there be a fresh cut?

OPEC sent an unclear signal to the market concerning production cut which has been its major aim since the 2016 slumps. Oil prices rose on Tuesday and Wednesday ahead of the meeting in Vienna. A cut is expected but the market will also want to know how deep? Over the weekend, Iraqi Oil Minister said the cartel would consider deeper production cut by 400,000 bpd.

However, the market is now ridden with uncertainties after the earlier-held Joint Technical Committee meeting ended without any talk of deeper cutbacks. Therefore, many analysts are now suggesting that OPEC might only extend the existing cuts with an option to review its policy later in 2020 when they hold the next meeting. It now seems anything short of an additional outright cut will send prices downwards based on the market behaviour since Friday.

US-China trade talks also weigh on the Oil market. A drop in the market mood following rhetorics of threats from the two sides might lead to the Oil price drop. However, noises have come down a bit and the market should now focus on the OPEC meeting in the meantime.

WTI analysis: oil prices recover but might plummet further

Technically, it looks like oil prices will plummet further. The rally that started on October 3 is clearly corrective although taking longer time than expected. The dip which started last week could be the continuation of the 16 September-to- 3 October impulse wave decline. The bearish run is resuming after the current correction fell from the 61.8% Fibonacci retracement level. In the last update, we used the chart below for WTI crude (Charting tools from Trading View)

After attaining stability around 61.8% Fib level ($58.66), WTI quickly fell. The new chart below shows we might likely see the continuation of the $63-to-$51 dips toward $48. This will happen especially if OPEC and its allies do not make fresh production cuts.

Oil prices recover

The bullish correction has completed with a double zigzag pattern at $58.66. The price had the first reaction to $55 for us to start a new bearish impulse wave to $51 at least. The next trigger is the break below $55 low. On the other hand, if all goes well in the meeting and talks meet cut expectations, we should see WTI advance to retest $58.66 high and maybe even breach it.

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