2016-10-03 16:03:05

Review and dynamics
Preliminary agreement to reduce oil production to the levels of 200 000 – 700 000 barrels per day, which was adopted last week has caused sharp rise in oil prices. Today, spot price of crude oil Brent has grown by $1 per barrel, reaching the level of 50.70.

The price has repeatedly rebounded from the level of 50.70 and started either short-term or medium-term reversal, such happened in November 2015.

At that time the price sharply went down to the annual lows at the level of $27.00 per barrel.

The level of 50.70 is Fibonacci 61.8% to the decline from 65.30 to the lows of 2016 at the level of 27.00.

Our opinion
Measure by OPEC may be insufficient to change the situation with the oversupply of oil. It may happen that these measures will never be implemented. Investors shall be very careful when opening long positions as the price may rebound from the current levels. It is also possible that the price of crude oil Brent can return to the balance line and support level of 46.20 (Fibonacci 50.0% and the moving averages ЕМА200 and ЕМА144 on the daily chart). The level of 46.20 is crossed by the lower line of the ascending channel on the weekly chart.

On the hourly and 4-hour charts Stochastic is in the overbought zone. if the price rebounds from the level of 50.70 and go down, the first target will be at support level of 47.50 (ЕМА200, ЕМА144 on a 4-hour, ЕМА50 on the daily charts).

The second target will be the key level of 46.20.

Break down of this level may trigger further decline in oil prices.

The nearest targets will be the levels of 43.65 and 41.70 (Fibonacci 38.2% and lows of July/August).

As an alternative scenario the price will grow up to the levels of annual highs of 52.80.

However, the meeting in Algeria has finished; Russia is close to absolute record in oil production above 11 million barrels per day; the number of active drilling rigs in the USA is growing steadily in the past 10 consecutive weeks (recent number is 425 units), the Fed continues to repeat that the rate hike in the US A may take place at the end of the year; Iran intends to reach the pre-sanctions level of oil production of approximately 4.1 million barrels per day.

So, only very optimistic investors will continue to increase long positions on oil in this situation.

Support levels: 50.00, 47.50, 46.20, 45.00, 43.65, 41.70 and 41.00.
Resistance levels: 50.70, 51.0 and 52.80.

Trading tips
Sell on the market. Stop-Loss: 51.30. Take-Profit: 50.00, 47.50, 46.20, 45.00, 43.65 and 41.70.
Buy Stop: 51.30. Stop-Loss: 50.60. Take-Profit: 52.00 and 52.80.

Critical level of 50.70
Critical level of 50.70

The levels of the range: 50.70, 46.20 and 41.70
The levels of the range: 50.70, 46.20 and 41.70