Crude oil price is falling today as traders eye an important meeting of OPEC+ meeting that will start today. The price of Brent, the international benchmark, has dropped by more than 1.65% while that of the West Texas Intermediate (WTI) has dropped by 1.48%.
The reason for the weakness is mostly because of the mixed signals ahead of the meeting. In a report, the Wall Street Journal, said that members of the cartel were leaning towards extending supply cuts for about three or four months. That would be a positive move for crude oil prices as the world recovers from the ongoing pandemic.
However, according to Bloomberg, there are divisions among the leaders on whether the supply cuts are necessary. While most of them agree, others from the United Arab Emirates, Kazakhstan, and Nigeria have opposed the measures. Therefore, if the two sides don’t reach an agreement, we will possibly see a return to surplus, which will be negative for prices.
The countries will also need to contend with a resurgent United States, where the number of active rigs has continued to rise.
Still, since Russia and Saudi Arabia are in agreement on need to pause hikes, there is a likelihood that their side will carry the day. In a statement, an analyst at BNP Paribas said:
“We expect that Saudi Energy Minister Abdulaziz Bin Salman will be at the forefront of preserving group cohesion, to ultimately deliver the much-expected delay to the tapering of supply cuts due next year.”
Crude oil price technical outlook
Turning to the daily chart, we see that Brent crude oil has struggled to cross the psychological important level of $50. The price is slightly below the 61.8% Fibonacci retracement level and is still above the 50-day moving average. It is also slightly above the ascending green trendline.
Therefore, like I wrote last week, I still believe that the price of oil will continue rising as the upward momentum remains. However, a decline below the 50% Fibonacci retracement at $43 will invalidate this trend.
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Crude oil price chart
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