Crude oil: China demand threat vs another OPEC+ cut

What prompted the latest turnaround which so far has seen Brent recover 5% from Monday’s low point near $80 per barrel has been fresh speculation that OPEC+ may consider an additional production cut on top of the 2 million barrel per day for November that was agreed at their latest meeting. 

With Russian oil production struggling amid sanctions, an additional cut for December will once again primarily be carried out by the four major Middle East producers of Saudi Arabia, UAE, Kuwait and Iraq. The meeting will be clouded by uncertainty given the unfolding developments in China, the EU embargo on Russian seaborne crude oil sales also beginning next week while the US treasury market is pricing in a near certain recession emerging in the US sometime next year. Ultimately the group, led by Saudi Arabia is looking for price stability, preferably in the 90’s for Brent, and with that in mind a strong signal of support or an actual cut in production can not be ruled out. 

Technical update on Brent crude oil from Kim Cramer, our Technical Analyst. The update also takes a closer look at WTI crude oil, Dutch TTF gas and Henry Hub natural gas. 

During yesterday’s session Brent Crude oil broke below support at $83.65 and the 0.786 Fibonacci retracement at $81.43 but later on managed to close above, thereby forming a Hammer candle which potentially could signal a bottom and reversal. A bullish candle today could signal a reversal from the current downtrend, signaling a recovery to around $92.32, the 0.618 retracement of the November selloff. However, to reverse the overall medium-term bearish picture a weekly close above $99.56 is needed. The RSI, currently in a downtrend is showing negative sentiment with a break above potentially signaling a reversal that could see crude oil prices move higher. Renewed selling taking Brent below $82.40 could trigger an downward extension to $77 or possibly lower.