From a technical standpoint, crude fell over 15 percent in short order since we pointed out the strong on 10/28. Price action z-score was within 1.75 and 2, as well as showing a sell on the indicator.
Fundamentally, we knew that a OPEC resolution for the ongoing production glut was unlikely to occur (as the last several times failed to produce anything material.) It's also important to note that the oil cartel deliberately chooses to float production cut or freeze rumors when crude position is the most short, which creates short-covering and an artificial bounce to the upside.
Saudi Arabia has been effectively managing crude prices without actually having to cut. To be frank, OPEC has gotten traders to salivate to cut rumors like Pavlov's dog to a bell all while ramping production near all-time highs.
It was insult to injury as U.S. producers managed to hit 34-year highs in weekly production with a print over 14 m/bbl.
We expect some upside movement since the commitment of traders report (5-year positioning percentile) showed a swift decline in net-long. Expect traders to pile back in only for the cycle to repeat itself.
Resistance can be found at $45.55 and $46.95. Deeper resistance at $47.60.
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