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WTI building a bullish case as OPEC+ expected to intervene

  • Oil extending its biggest daily gain of 2020 as traders hope for OPEC cuts this week.
  • The price of oil remains technically bullish with bullish divergence playing out, en-roue to the 2020's ranges point of control. 

The price of oil is rallying and extended its overnight session gains in Asia, travelling from a low of $47.58 to a high of $48.53, +1.26% on the session so far. This follows a positive settlement for oil futures of a gain of more than 4%—the biggest daily percentage climb of the year. Investors are pricing in the prospects that OPEC and its allies will soon announce additional production cuts subsequent of the meeting in Vienna.

"Signs emerged from Russia that prices have breached the Putin-put, implying the country will join forces with other OPEC+ members to stabilize oil markets," analysts at TD Securities explained. "Average analyst expectations are for a 750k bpd cut but we suspect that markets will require OPEC to take a more decisive measure as the infection spreads outside of China. In this context, RBOB gasoline should continue to see CTA selling pressure as momentum funds respond to the still-deteriorating momentum signals."

Additionally, equity markets were flying and the DJIA added 1,293 points, or 5.1%, to close at 26,703, a stunning move in what was marking its best point gain in history and its best percentage gain since March 23, 2009. Investors are banking on global central banks to step in support economies amid the coronavirus epidemics. 

Eyes on central bankers

Traders are tuned in, listening out for comments from central bankers in the lead into the various interest rate meetings coming up this month. We have the Reserve Bank of Australia today ahead of the G7 finance ministers and central bankers who attending a teleconference on Tuesday to discuss their policy response to the economic fallout from the coronavirus. The G7 call is going to be led by Mnuchin and the Fed chair and there’s going to be a communiqué afterwards.

WTI levels

Meanwhile, the hourly divergence int he momentum indicator (27) has seen a bullish burst in the black gold, en-route to 49.50 prior support for which a subsequent test thereof and a hold above the level will open the point of control (POC) of the 2020 range which sits at 51.55. This is a key level which tallies up with Fibonacci retracements plotted from various swing levels of the downtrend – or a 38.2% Fibonacci retracement of the entire range. Should the daily divergence playout, then this could be the start of a prolonged uptrend towards a 61.8% Fibo of the April 2019 peak (57.94). The point of control of the same range is located at 56.63.

 

 

 

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