OPEC data juices West Texas Intermediate (WTI) oil to 1-year highs: Where next?
Matt Weller, CFA, CMT February 3, 2021 2:46 AM
The intentional reduction in supply of oil is working as expected, with the market expected to be balanced in the coming months.
With so-called “meme stonks” like Gamestop (GME) and AMC Entertainment (AMC) trading down by more than -50% at the US open, traders are turning their attention back to developments in more traditional financial markets.
In that vein, one of today’s biggest developments was the leak of an internal OPEC document. Per a copy obtained by Reuters, the oil cartel found compliance with last month’s production cuts was 99%, leading OPEC to forecast that the oil market will be in a 2M b/d deficit by May. In other words, the intentional reduction in supply of oil is working as expected, with the market expected to be balanced in the coming months.
While the group did cut its forecast for demand by 300k b/d, the positive news on the supply front was the far more significant development for traders.
WTI technical analysis
Prices for West Texas Intermediate (WTI) crude oil have responded to the bullish news, breaking out of the 3-week sideways range to hit the highest level in more than a year. From a technical perspective, the commodity has been consistently riding its 21-day EMA higher since mid-November, signaling a healthy uptrend. Meanwhile, the recent sideways consolidation has taken the RSI indicator back out of overbought territory, potentially clearing the way for a continuation higher as we move through February:
Source: TradingView, GAIN Capital
In the short term, the bias for WTI will remain bullish as long prices can hold the breakout above $54.00. After providing strong resistance over the last three weeks, this level should serve as support moving forward. To the topside, there’s little in the way of resistance until a minor high and psychological resistance at $60.00.
Learn more about oil trading opportunities.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.