The crude oil market has got off to very positive start in the new trading week – as prices surge, UKOil is trading over $80.00 a barrel a level not seen since November 2o14. Meanwhile USOil has breached the $72.00 per barrel today. Prices have risen after the OPEC (plus its key producer ally Russia) meeting in Algiers over the weekend ruled out any increase in production or output. Last week, US President Donald Trump told OPEC to lower prices, but Saudi Energy Minister Khalid al-Falih said: “I do not influence prices.” Additionally, the political climate is likely to underpin the Oil market as tensions between the USA and Iran continue to sour following the attack on Saturday in Ahaz and with President Trump chairing the UN Security Council later in the week, determined to have Iran top of the agenda. Iran’s President Rouhani will also be at the UN this week.
Technically and fundamentally the Oil market remains bid. Reuters reported earlier that “It is now increasingly evident, that in the face of producers reluctant to raise output, the market will be confronted with supply gaps in the next 3-6 months that it will need to resolve through higher oil prices,” BNP Paribas oil strategist Harry Tchilinguirian told Reuters Global Oil Forum. The major commodity traders Trafigura and Mercuria also said on Monday that Brent (UKOil) could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November.
On the technical front, USOil broke the 20 day moving average on September 11 (UK Oil is even more robust having broken the 20 day moving average August 22) and remained capped below $70.00 and the 50.00 Fibonacci level until last week. The key 61.8 Fibonacci level ($71.10) was also breached for the first time in today’s rally. The daily R2 and R3 levels now sit at $72.65 and $73.45, with the late June/ early July Fractal highs at the 74.25 level. RSI and Stochastic momentum indicators remain positive and not into the overbought zone at 63.30 and 75.75 respectively. The daily pivot point is $70.85 and S1 support sits alongside the 50.0 Fibonacci level at the key $70.00 level.
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