WTI losing tracton on strong dollar and outlook for demand for resources worsening

• West Texas Intermediate is pressured as the dollar takes back control with global growth fears continue to dominate and investors quick to move on from the cut of 1.2 million barrels per day agreed by ‘OPEC+ last week.
• West Texas Intermediate is currently trading at 50.95, up from 50.87 having reached a high of 52.99.
• West Texas Intermediate crude for January delivery dropped $1.07, or 2%, to $51.54.

Oil futures were higher on Friday, by almost 2% across the board, and as much as 4% at one point, with OPEC announcing that it will reduce overall production by 800,000 barrels a day from October’s levels for six months, beginning in January. November cuts have been reported as being at around 400,000 barrels a day, to bring the total reduction to 1.2 million barrels a day.

 OPEC+ agreed to cut production, but they have not done so by as much as the markets had hoped for, at least 1.5m barrels a day. Combined with ongoing concerns over global trade relations and world growth, the price of oil stays on the back foot as the outlook for demand for resources worsen. 

The Energy Information Administration said last week that U.S. crude supplies had fallen by 7.3 million barrels for the week ended Nov. 30 which marked the EIA’s first reported weekly supply decline in eleven weeks. We also had the Baker Hughes implying a decline in future output, with the number of active U.S. rigs drilling for oil down by 10 at 877.

To add to the mix, China reported a much more significant than expected $44.75B trade surplus for November, vs the $34.0B surplus expected. When considering the ambiguous trade ceasefire of 90 days between the US and China, with a surplus as high as that, it brings the situation to the boil, especially with fresh concerns coming over the arrest of Huawei Technologies’ CFO.

WTI levels

• Support levels: 50.83 48.91 47.03
• Resistance levels: 54.27 56.15 57.89

The bulls need to get above the 23.6% Fibo retracement of the recent rout from just below the 77 handle at 56. The 21-D SMA has moved lower to 53.85, and this comes as first key resistance below the 23.6% fibo. The daily & weekly RSI remains above 30 while monthly RSI and DMI remain bearish. The 123.6% Fibo extension target comes in at the 43.90s while the June 2009 lows are nearby at 41.83. On the wide, the 161.18% Fibo extension target is situated at 33.77, and the Jan 2016 low is down at 26.03.