- Brent enters squeeze ahead of OPEC+ decision
- Will cartel deliver or disappoint?
- Supply cuts from OPEC+ could trigger 400-point rally
- Brent in ascending triangle and above 21-day SMA
Oil extended gains on Thursday as market focus shifted towards the OPEC+ meeting that was postponed from last week due to internal disagreements.
Brent prices punched above $83 this morning after jumping almost 4% over the last two sessions after a severe storm in the Black Sea region sparked supply concerns. While this development has kept oil prices buoyed, the looming virtual OPEC+ meeting today is likely to influence the global commodity’s outlook.
Given the sharp selloff in oil prices since mid-September, OPEC+ could make further changes to an agreement that already limits supply into 2024. Indeed, oil has been hammered by concerns about weaker economic growth and expectations of a supply surplus in 2024. However, discord over output quotas for African oil-producing countries could act as an obstacle that leads to further delays in negotiations.
- Oil prices may weaken if the cartel fails to reach an agreement on production quotas for 2024 or disappoint market expectations for deeper supply cuts.
- Should OPEC+ move ahead with deeper supply cuts, this could lend oil bulls fresh support – pushing the global commodity higher as a result.
Since the November 16th low at $77.08, the black gold has rallied within an ascending triangle for over 600 points and as of the time of writing sits above its 21-day SMA at around $83.
According to Thomas Bulkowski in his book “Encyclopedia of Chart Patterns”, ascending triangles perform better with upward breakouts, with a 70% chance of meeting their breakout target, and a 17% breakeven failure rate.
Brent bulls may take any deeper production cuts as bullish and rally to the following key resistance levels.
• $83.66: the 261.8 Fibonacci level
• Its 50-day SMA
• $88: A significant price level
The Fibonacci level is drawn from the September 26 low to the September 28 high on a daily time frame.
However, if widely reported disagreements over these quotas continue, we could see brent oil prices fall to test the following support levels.