2016-10-12 18:58:10

Review and dynamics
Preliminary agreement to reduce oil production by 200 000 – 700 000 barrels per day has caused sharp rise in oil prices.

The speech by President of Russia Vladimir Putin at the World Energy Congress in Istanbul at the beginning of the week, has also contributed to the rise in oil prices.

The price of crude oil Brent has soared up to the level of 53.70 per barrel (ЕМА144 on the weekly chart). Mr. Putin has said that Russia is ready to join a treaty to reduce oil production,. He also said that freezing or reduction of oil production is the only way to maintain stability of the oil and gas sector.

The price of oil has corrected later, and today Brent is trading in the narrow range at the level of $52.80 per barrel.

Our opinion
Volatility in the oil market is increasing lately. However, measures, which OPEC countries are going to adopt, may be insufficient in order to stop oversupply of oil.

The number of active drilling rigs in the US is growing steadily for the tenth consecutive week. Up to date, the number of rigs has reached 428 units. Recent positive US labor market data has increased probability of the rate hike in the US until the end of the year.

Traders need to be very careful when opening or increasing long positions. In case of activation of the stop orders to sell, the increasing sales will sweep stop-losses, which will trigger further decline in oil price.

The pair may fail to exceed the range of 52.80 – 53.70.

The price of crude oil Brent can quickly go back to support levels of 46.20 (Fibonacci 50.0% after the decline from $65.30 to the lows of 2016 at the level of 27.00) and 47.00 (moving averages lines ЕМА200 and ЕМА144 on the daily chart).

Breakdown of the level of 46.20 may trigger further decline in oil prices. The nearest targets will be at the levels of 43.65 and 41.70 (Fibonacci 38.2% and the lows of July/August).

As an alternative scenario the price will break out the level of 53.70 and go up to the level of 56.00 (ЕМА200 on the weekly chart).

On the weekly chart the indicate OsMA and Stochastic continue to rise. On 4 -hour and daily charts the indicators also give signals for short positions, which may indicate the beginning of the correction after the rapid rise.

Support levels: 51.15, 50.70, 50.00, 47.00, 46.20, 45.00, 43.65, 41.70 and 41.00.
Resistance levels: 52.80, 53.70, 55.00 and 56.00.

Trading tips
Sell on the market. Stop-Loss: 53.80. Take-Profit: 52.00, 51.15, 50.70, 50.00, 47.00 and 46.20.
Buy Stop: 53.85. Stop-Loss: 52.60. Take-Profit: 55.00 and 56.00.

Resistance level is 53.70 and ЕМА144
Resistance level is 53.70 and ЕМА144

In the upper limit of the ascending channel
In the upper limit of the ascending channel