WTI oil holds in red on Wednesday and dipped below $51 handle, retracing over 61.8% of two-day $50.09/$52.53 recovery and signaling that corrective phase might be over. Oil bears took a breather after falling over 6% last Friday, helped by optimism over possible reduction in the output from OPEC and Russia. Recovery was capped by broken 200WMA, losing traction well below pivotal barrier at $53.82 (falling 10SMA) and signaling that initial improvement in sentiment might be short-lived. Fears about global growth slowdown and escalation of US/China trade conflict if two Presidents fail to reach an agreement on G20 meeting on Friday, which would significantly impact global demand, keep oil prices under strong pressure. Bearish daily/weekly techs and the strength / length of corrective actions during the whole downtrend from 03 Oct 2018 at $76.88 high, suggests that corrective has finished and renewed attack at psychological $50 support could be likely scenario. Adding to scenario was Tuesday’s API crude stocks report which showed build of oil inventories by 3.5 mln bls (following previous week’s 1.5 mln bls draw). Release of US EIA crude stocks report today (0.7 mln bls build f/c) would add to negative outlook if data come above expectations. OPEC meets next week and this could be the key event for oil market, as the bloc is expected to announce whether they are going to reduce production or not. Saudi Arabia announced that they will not take any unilateral action and want all members to agree before proceeding with output cut. On the other side, Saudi Arabia’s position is complicated as they show willingness to take action along with other main oil producers, but are under strong pressure from US President Trump who asked Saudis to keep the output unchanged and further lower oil prices. Bearish scenario on sustained break below $50 would risk extension towards $45 zone initially and would unmask key support at $42.04 (2017 low). Conversely, sustained break above 10SMA would sideline bearish threats and generate initial recovery signal.
Res: 52.53; 52.76; 53.81; 54.09
Sup: 50.26; 50.00; 49.10; 46.99
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