Oil prices edged higher during Tuesday’s trading session, as investors pondered over what “extraordinary measures” OPEC may implement to rebalance oil markets in the medium to long-term.
Although the commodity got off to a rough start last week, after traders questioned the sustainability of the rally, recent comments from OPEC stating that there are clear signs that markets were rebalancing, have supported WTI crude. With OPEC’s Secretary General Mohammed Barkindo almost pleading for U.S. shale oil producers to help reduce the global supply glut, could the tough tug of war between U.S. shale and OPEC be coming to an end?
It has certainly been a tricky year for OPEC, especially when considering how U.S. shale production soared nearly 10%, despite the cartel's valiant efforts to cut supplies to prop up prices. Although Saudi Aramco plans to make “the deepest customer allocation cuts in its history” by cutting 560,000 bpd next month, its impact could be diluted if the U.S. shale producers see this as a Christmas gift.
As we head deeper into the final trading quarter of 2017, investors will continue to scrutinize markets for any fresh details on the “extraordinary measures” and signs of OPEC extending its production cuts beyond March 2018.
From a technical standpoint, WTI crude has staged an impressive rebound from the $49.08 level. A decisive breakout above $51.00 should encourage a further incline towards $52.40. In an alternative scenario, sustained weakness below $49.00, which is also under the 50-day Simple Moving Average, may open a path towards $47.80.
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