United States Oil (USO) drops as market awaits ratification of OPEC+ supply cut

United States Oil (USO) drops as market awaits ratification of OPEC+ supply cut

United States Oil (USO) drops as market awaits ratification of OPEC+ supply cut

Oil slipped in early Asian trade on Friday, with U.S. crude moving further away from a two-month high after OPEC agreed to increase output curbs in early 2020 but failed to promise further steps after March.

Brent futures were down 21 cents, or 0.3%, at $63.18 by 0258 GMT.

West Texas Intermediate oil futures fell 14 cents, or 0.2%, to $58.29 a barrel. They hit $59.12 a barrel on Thursday, the highest since the end of September.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed to more output cuts to avert oversupply early next year as economic growth stagnates amid the U.S.-China trade war.

The agreement, which needs to be formally adopted later on Friday, will cut an extra 500,000 barrels per day (bpd) of production, through tighter compliance and some adjustments. The group has been withholding 1.2 million bpd and the increased amount represents about 1.7% of global oil output.

The “decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance,“ said Edward Moya senior market analyst at OANDA.

A panel of ministers representing OPEC and non-OPEC producers led by Russia recommended the cuts, according to Russian Energy Minister Alexander Novak on Thursday.

Details need to be hammered out at an OPEC+ meeting that starts later on Friday in Vienna.

Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

“North American shale supply will continue growing even in an environment with lower oil prices,“ Rystad Energy said in a note.

Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.

The sale was the world’s biggest IPO, beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of valuing Aramco at $2 trillion, a target sought by Saudi Crown Prince Mohammed bin Salman.

Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 12.75.

The projected lower bound is: 11.64.

The projected closing price is: 12.20.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 68.6720. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.60. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 122 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 93. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed unchanged at 12.190. Volume was 13% below average (neutral) and Bollinger Bands were 39% narrower than normal.

Open     High      Low     Close     Volume___
12.310 12.350 12.145 12.190 23,810,044
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 12.02 11.61 11.98
Volatility: 38 30 39
Volume: 21,243,764 23,031,120 25,970,314

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

UNTD ST OIL FUND is currently 1.8% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on USO and have had this outlook for the last 26 periods.

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