Crude oil prices continue to consolidate above $57 this Monday, but the brief upside rally of last week seems to have fizzled out as optimism from possible OPEC cuts have waned.
WTI crude oil is trading at 57.61 as the week starts on a dull note in the energy markets. However, latest reports from the International Energy Agency (IEA) point to an increase in global supplies in 2020 that could produce an oil glut. The IEA is projecting that supply from non-OPEC sources could hit add an additional 2.3 million barrels per day, which would far outstrip the projected demand increase of an additional 1.2 million barrels per day.
OPEC’s production cuts are to terminate in March 2020 and there is no doubt that possible extension of the termination date, as well as deepening of cuts could be on OPEC’s agenda in its December meeting in Vienna.
“A continuously well-supplied market will lend support to a fragile global economy”, the IEA report stated.
The WTI crude oil technical outlook shows that the price is still trading within the rising channel on the daily chart, although price action within the channel has started to form a plateau.
Upside momentum is presently limited, having been dampened by the latest IEA monthly report. Without any major bullish fundamentals at play, I expect WTI crude to start to push towards the lower channel border.
A breach of the channel to the downside targets 54.65, the previous lows of July 18 and September 13. This price level also served as the neckline of the double bottom of June 2019. Further support is seen at 54.01 (double bottom area of June 2019) and this level could become relevant with continued bearish momentum.
Any upside recovery could target the March 21 and July 01 high of 60.35, with 63.33 standing by as further resistance if 60.35 is breached.More content