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Reflections #10 - Oil remains heavy as the OPEC cut fails to support prices

Oil remains heavy despite the surprise Opec cut of 1mbd. Why is it so heavy and are we breaking lower now?

One reasoning for the shallow price reaction to the cut is that reduction in production is unilateral to Saudi Arabia which seems keen to keep prices supported. In order to show unity it may have also made concessions to other Opec producers. Traders likely evaluated this, as not as bullish as a uniform cut across all producers. Hence, less interest to engage in longs. Another reason and potentially more important is, that current demand is in fact slowing significantly and producers are happy to sell any rally.

Technically, oil prices look heavy at the lower end of the trading range in place for the last 6 months. A sustained break below the 200wma, which acted as strong support in the past, exposes the 61-66 support zone. Below that next bigger support area is only around 50/51.


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