WTI Crude Oil Edges Higher, Buoyed by Potential OPEC Supply Cuts

[MongiIG]

• WTI climbs toward $94 a barrel after gains of 2.5% last week.
• Investors track supply cuts, fresh unrest in Libya and timeline for Iran talks.
• 95.00 key level provides a host of confluences which could cap gains.

WTI FUNDAMENTAL OUTLOOK

Crude Oil prices gained 1% this morning as expectations returned regarding potential supply cuts by OPEC to support prices. This comes on the back of fresh clashes in Libya over the weekend, which sparked fears of further upheaval in the OPEC nation that could put oil shipments at risk. West Texas Intermediate rose toward $94 a barrel, reversing an early decline, after posting gains of 2.5% last week.

Despite the gains seen last week, crude is on course for a third straight monthly drop on concerns of slowing global growth and continued central bank tightening. Saudi Arabia meanwhile raised the possibility that OPEC could cut output to ensure prices remain supported, an idea which drew support from fellow member states. Separately, loadings from an export terminal for Kazakhstan crude have seen interruptions already.

WTI CRUDE OIL DAILY CHART –AUGUST 29, 2022

Source: TradingView

From a technical perspective, we have spent the majority of August trading between the 50-61.8% fib levels. We closed bullish on the weekly timeframe while closing as a doji candle on the daily timeframe, suggesting some indecision may be ahead. A bullish candle close and retest of the 95.00 key level which lines up with the 200-SMA could very well see us form a three-pin formation of support. Should we reject the key 95.00 level once more we could see price find support around the 89-91.00 price level which would also see us create an inverse head and shoulders pattern with the early month low and mid-month low acting as the left shoulder and head respectively. This of course could take a few days to play out but is worth keeping an eye on.

To confirm a bullish move higher, we would need to see a sustained break above the 200-SMA with a retest and bounce confirming bullish momentum and potential further upside. A daily candle close below the 89.00 could very well see us take out the 16th of August low at 85.54.

 

Written by: Zain Vawda, Market Writer for DailyFX.com