Oil thrashed through November, tumbling down to its worst nightmares since July 2016. The black gold dove to reach below the 50s, and Brent below the 60s reaching around the 57-58 territory.
However, December kicked off with a great start for oil, as it soared nearly 4% on Monday after the US and China agreed to a 90-day truce in trade dispute and Canada’s Alberta province ordered an oil production cut by almost 9%. Both Crude Oil and Brent opened Monday with a gap, indicating a strong Bullish momentum that gave Oil the extra boost it was looking for.
Oil got added bullish pressure after a report on Tuesday by Reuters saying that OPEC producers are looking towards cutting production by 1.3 Million Barrels per day. This gave oil a stronger comeback for another day extending its gains with WTI hovering around the 53-54 territory and Brent around the 63 territory. The Agreement between Russia and Saudi Arabia strongly supported the oil upward as the news from Qatar leaving the OPEC was not registered among traders.
Technically speaking, the Black Gold is climbing the uptrend ladder all the way to the 55-territory resistance near the 50% Fibonacci Retracement level, ascending to the 57 territory near the 61.8% Fibonacci Retracement Level. After it breaks through this strong resistance level, it has a high chance to accelerate towards the 61-62 territory retracing 100% from the opening.
It’s time the Bulls seek revenge from the Bears. The double golden cross of the 50-hour moving average (Blue line) over the 100-hour moving average (Pink line) and the 200-hour moving average (White line) respectively signals as a confirmation of an uptrend where Bullish buying pressure seems to be defeating bearish selling pressure helping the black gold back to its golden days above the 60s.
There is also positive momentum on the RSI as well, where the indicator was able to trade above the 60s on Monday as a response to the news. It tried breaking below the neutral 50 but then consolidated near the 60s. Such trading still signals a positive momentum that brings optimism to the Crude oil.
The positive momentum could rest for a while taking the Fibonacci retracement levels as a potential support levels around the 52 territory (23.6% retracement level) and the 54 near 38.2% retracement level.
With a 1.3 million barrels a day production cut, oil is expected to climb to the 60s with a 100% retracement of the downward move. If the cut exceeds 1.5 million barrels per day, prices could be pulled near the 70s again; while a 2 million barrels per day cut, bulls would have hit the jackpot as oil can be expected to reach the 80s.
As the OPEC meets on Thursday, investors will need to keep an eye on the agreed amount as it could easily affect the course oil takes.