A couple of months ago oil hit the key level of $71 where it did receive some temporary support from, and likewise at $75 which propped up oil for a week. However both of those key levels gave way to immense selling pressure pushing it lower. Whilst not as significant as the current $58 level, the $71 level is likely to offer resistance should oil continue its rally higher.
Oil enjoyed a very healthy August and September moving from that key $71 level to its highs before falling back to the same level. Just prior to this pronounced move up to its recent highs, oil was content to remain within its trading range between $71 and $75. Through May and June oil had established a trading range between the two key levels of $75 and $80, with the former offering reasonable support during that time. During this time oil reached a three year high in May above $80.
As expected, we have seen supply cuts from the Organization of the Petroleum Exporting Countries (OPEC). OPEC led by Saudi Arabia, has been pushing for the producer cartel and its allies to cut 1 million to 1.4 million barrels per day (bpd). In the last quarter of 2018, the oil price was hit hard due to concerns over the global economy fuelled by tensions between the United States and China. Since the beginning of a truce in their ongoing trade war, the world’s two largest economies started their first formal talks on Monday. It is widely accepted that the downside risks of the trade dispute for the market were too big and difficult to quantify, and that China remains the biggest concern, especially given the weakness in the latest economic data. To start this year, oil has moved well as the market absorbs cuts in OPEC production that come into force this month. There has been a combination of factors driving the oil price recently with the impact of supply cuts and the concerns over a possible global economic slowdown pushing it approximately 18 month lows at the end of last year.
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