Oil’s volatility has climbed to its highest levels since February. The main reason for this is the meeting of OPEC, which will be held at the end of this week – Thursday and Friday in Vienna. The question that concerns all market participants is whether group members will maintain production restrictions that have raised black metal prices to $ 70 a barrel or there will be a change in the agreement that reduces daily production by 1.8 million barrels from the market for the past 18 months. Russia is pushing to return a million barrels a day to the markets. Saudi Arabia will most likely try to reduce the number to prevent prices from falling too much. But, not all OPEC members agree. Iran, Venezuela and Iraq are of the opinion that the current agreement is good and should be maintained. Gold prices lost more than 4% on Friday, as traders expect an increase in global supply.
A quick look at Oil’s chart and we can see the breakaway of the trendline starting in February this year. There is a Head & Shoulders trend-reversing formation, and the price broke and tested successfully the neckline of the figure. In other words, the formation is activated, which means that the technical picture here supports the rather negative expectations of the weekend meeting.
Execution of the figure 1:1 will lower oil prices to their 200 SMA on daily chart, around $ 60 per barrel.
Graphic: Used with permission of Bloomberg Finance L.P.
Trader Aleksandar Kumanov