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Saudi, and Iran Reaffirm Support Of OPEC+ Production Cuts

On Monday the Saudi Energy Minister reaffirmed support for the OPEC+ cuts which are to continue until the end of 2023 and noted that the bloc remains ready to intervene when necessary to balance supply and demand. US Crude completed a sizeable intraday reversal as a result of the comments after pacing towards a close below the prior (Sep) yearly low.

However, rapidly rising Covid infections in major Chinese cities – which have now surpassed the country’s peak back in April this year – threaten to restrict movement in an attempt to reduce infections, weighing on future expectations of demand for the commodity. Price action appears caught up in the two competing forces (lower future supply and lower future demand), hovering above a very key level of support.

EU Nations Oppose Current Proposed Russian Oil Price Cap

Yesterday, EU nations proved to be miles apart in the assessment of an appropriate price cap for Russian seaborne oil despite the looming December 5th deadline. Poland put forward a price of $30 per barrel on the bases that it believes Russia’s production costs sit around $20, which represents a significant departure from the $65 - $70 proposed by the G7.

To make matters worse, countries like Greece Cyprus, and Malta with significant interest in the shipping industry remain susceptible to Russian oil cargo obstructions, suggesting that the current price cap is too restrictive. It can be argued that a cap at the currently proposed level sees only a slightly lower price for Russian oil when compared to prevailing market prices, bringing into question the effectiveness of the cap.

Oil (US Crude) Technical Analysis

Despite the rather volatile moves in oil prices, the bearish trend remains as the $77 or $77.49/50 marks become central to the direction of future direction. The $77 mark coincides with the 78.6% Fib retracement of the major 2021 – 2022 move to produce a fairly robust zone of support. Both scenarios of a bounce and rally, as well as a potential break below, remain in play. To the downside, the $67 - $72 zone is a clear zone of support as this is the level the US communicated it looks to replenish SPR reserves which can lead to a retest of the $77 mark, thereafter.

A bounce-off support highlights the recent candle highs around $82.50 before the 61.8% Fib retracement at $88.40 which is a fair distance away for now.

US Crude Oil Continuous Futures (CL1!) Daily Chart

(Click on image to enlarge)

Source: TradingView, prepared by Richard Snow

The weekly chart shows the significance of the longer-term level of $7749/50 which has acted as a pivot point at numerous stages in the past (circled in yellow). This level remains very much in play and can be viewed as a tripwire for either a bearish continuation or another bounce-off support.

US Crude Oil Continuous Futures (CL1!) Weekly Chart

(Click on image to enlarge)

Source: TradingView, prepared by Richard Snow

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