MARKET BRIEFING – LONDON OPEN 24.11.2015
Oil ended last trading session higher after Saudi Arabia, the world’s largest petroleum exporter, agreed to cooperate with other oil producing countries on price stability.
West Texas Intermediate price reached US$ 43.00 high during the yesterday’s session, whereas Brent surged to US$ 45.99 level. After a market experienced a significant volatility due to the announcement, WTI closed the day 45 cents higher, whereas Brent gained 58 cents.
Oil price lost almost two third of the value since its collapse began in the middle of 2014, with the WTI hitting the low of US$ 37.92 at the end of last August.
In the previous meeting held by Organization of Petroleum Exporting Countries last month, Saudi Arabia declared that despite the worrying market state it is not willing to cut the production presently.
As the oil industry is mainly controlled by just a few large oil producers, it implies quite a harsh competition. By allowing a significant price drop, the larger producers could ensure that smaller competitors will be erased, as producing at the low cost is unsustainable to them.
Nevertheless the incentive for higher prices has still remained for the producers, with many analysts believe that the currently low prices could not last long.
At the moment, the OPEC has set the limits of production at 30 million barrels per day. However, since there is no penalty imposed on the producers in case these restrictions are exceeded, the chances are that the present parameters are not kept by some of the OPEC members.
The Saudi comments came just a day after the Venezuelan Oil Minister Eulogio Del Pino told in a press conference that the oil price could drop to as low as US$ 20 if no change in the OPEC’s current policy will be made.
Mr Del Pino comments are doubled by the September’s forecast of Goldman Sachs, which indicated that the Oil price could reach US$ 20 per barrel next year. Nevertheless, the majority of analysts believe that the oil price should balance closer to US$ 60.
For now the Saudi Arabia proposed “willingness to cooperate” does not, in fact, change anything and remains just words. Recently surging US Dollar is adding further pressure on the black commodity’s price.
The weakness of the world’s second largest economy China, therefore the significantly reduced demand for Oil is an additional heavy weighting factor. Therefore drastic actions and significant efforts need to be implemented in order for the oil price to recover in the near future.
The next OPEC meeting will be held on December 4 could give some more hints regarding the direction of the Oil price in the near future, however, it seems unlikely that the current market-based pricing strategy will be abandoned by the organization.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0726
Target 2: 1.0546
Projected range in ATR’s: 0.0097
Daily control level: 1.0825
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5219
Target 2: 1.5025
Projected range in ATR’s: 0.0097
Daily control level: 1.5335
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 123.48
Target 2: 122.18
Projected range in ATR’s: 0.649
Daily control level: 123.75
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0270
Target 2: 1.0118
Projected range in ATR’s: 0.0076
Daily control level: 1.000
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3445
Target 2: 1.3281
Projected range in ATR’s: 0.0082
Daily control level: 1.3245
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7256
Target 2: 0.7120
Projected range in ATR’s: 0.0068
Daily control level: 0.7070
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1081.75
Target 2: 1055.85
Projected range in ATR’s: 12.95
Daily control level: 1098.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 43.80
Target 2: 40.84
Projected range in ATR’s: 1.482
Daily control level: 43.00
MORE ON ACFXblog.com