CommoditiesTrader

Brent Near-Term Outlook

MGEX:CB2!   None
Brent crude has been able to rally on little volume during the U.S. banking holiday and rumors surrounding a potential unified OPEC production cut, issued by the UAE energy minister just as WTI was carving out a 12 year low (and in the middle of the night, local time, no less.)

Four days later, there has been no new reports of said production cut proposal, but something interesting has been reported by Charles Kennedy at Oilprice.com - "UAE Offers India Free Oil To Ease Storage Woes."

There is still no reason why OPEC would cut production now given the distress its tactics are already causing in the U.S. shale space. To cave in now, OPEC's squeeze on U.S. shale would be a failure and U.S. shale would be a beneficiary.

The same UAE that sparked the latest crude short-squeeze has so much oil , it's bribing India with free oil in order to access a underground Indian storage facility to park abundant reserves. Go figure.

Despite OPEC's true unwillingness to cut production, the technical outlook for Brent could prove positive unless risk sentiment is turned off.

Currently testing price resistance at $33.81, Brent crude has found support at two key weekly support levels: $27.83 and $31.59. The ADX is showing a lack of momentum in the current move, but +/- DMI could, potentially, have a bullish convergence.

The growing tensions between Saudi, Turkey and Syria could reignite risk premium, but many analysts have suggest that any substantial premium is unlikely due to the current supply glut. Even so, resistance at the 50-day EMA coincides with a minor downtrend.

However, a break north could test $38.46 to $40.34. If price breaks down, Brent could easily retest $27.83, while more talk of not cutting production would send the international benchmark to $22.98.


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