Week-long oil selloff is coming to an end

08 December 2023 177
Week-long oil selloff is coming to an end

Brent oil price after a week-long selloff finally managed to stabilize. Having lost more than 10% in recent days, on Thursday oil prices found support in the range of $73–75 per barrel. Yesterday's growth attempts failed to stir great enthusiasm among traders, but the end of the downward movement encourages traders to close short positions. The first rebound target could be the November low at the level of 76.5.

 

Additional oil production cuts announced last week by OPEC+ didn’t impress market participants. However, traders probably underestimate the effect of the new measures. Bjarne Schieldrop, chief commodities analyst at Skandinaviska Enskilda Banken, pays attention to details. The new quota restrictions are stated as voluntary, and it raises doubts that they are going to be met. In addition, Saudi Arabia hasn’t made any additional cuts and will continue to produce 9 million barrels of oil per day.

 

However, Schieldrop considers the effect of the latest OPEC+ moves to be underestimated. Additional production cuts by 900 thousand barrels per day is already having an impact on the physical market. There is going to be a change in stock exchange oil prices over time. According to the analyst, the optimal oil price for both producers and consumers is $80 per barrel.

 

Meanwhile, OPEC countries in November have already deepened oil production cuts. According to Reuters, the exporting countries reduced oil production for the first time in 5 months. The level of production amounted to 27.81 million barrels per day, a drop of 90 thousand barrels compared to October. The largest production cuts were recorded in Nigeria, Iraq, UAE and Angola.

 

On the daily Brent chart, both lines of the Stochastic indicator fell into the oversold zone. A full-fledged signal to the trend reversal can be received in the near future. In the short-term, bulls can focus on the level of 76.5, a return to the level of 80 is also possible.

 


The following trading strategy can be suggested:

 

Buy Brent oil at the current price. Take profit — 76.5. Stop loss — 74.5.

 

Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.

This content is for informational purposes only and is not intended to be investing advice.

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