Brent Crude Oil Intraday Market Analysis: Will OPEC Cut Output in April?

Crude Oil Intraday Strategy

Since OPEC’s efforts to sustain crude oil prices no substantial gains were noted in the commodity. US shale oil companies increased their output, which dampened a moderate rebound in crude oil prices as a result of the output cut. US  Over the weekend there has been a recommendation to OPEC to extend the output cut by six months. A meeting is expected some time in April 2017 to affirm whether an extension will take place and its details. OPEC is likely to assess crude oil stockpiles and determine how to proceed. The US oil shale producers are not committed to OPEC, which is why OPEC must take action if it wishes to contain crude oil weakness in the energy markets. If not extended, the output cut is expected to end in June, 2017.

Although Brent crude oil is positioning itself for a recovery it appears the expected strength may be short-lived based on the daily chart. We will present our strategies on the daily and monthly charts.

Brent Oil Daily Chart

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Brent Crude Oil Daily Chart 26/03/17

We have noted the positive divergence that was affirmed on Friday’s close. A break above 52.35 may affirm further gains towards the latter resistance around 55.50. Should Brent fail in breaking above the resistance we may note corrective weakness towards 52.35. Basing the analysis on the daily chart there may be a struggle in breaking above the resistance levels (blue diagonal lines). The monthly chart however presents a more bullish outlook for Brent crude oil.

Brent Oil Monthly Chart

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Brent Crude Oil Monthly Chart 26/03/17

Brent has marked a second higher low while posting higher highs. If the price is able to close above 50.40 at the monthly close it may suggest Brent crude oil is due for moderate gains. The initial target for the anticipated rally is seen at 57.90. The current projection suggests crude oil will break above 57.90, targeting 61.00 at the time of this writing. The fundamental trigger for such rally may suggest an aggressive oil output cut by OPEC or perhaps new sanctions on Iran. In terms of intraday strategies, the key levels we presented may be used to capitalize on the market via short time frames. We often do not dive into monthly charts in our intraday strategies but we found it essential in presenting our technical forecast for Brent crude oil. We will update our analysis in accordance to any technical developments based on our analysis.

21/05/17 UPDATE: Brent crude oil retraced off the resistance level as we have anticipated while 48.35 was targeted and contained the weakness, which lead to a firm rebound.

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Brent Crude Oil Daily Chart 21/05/17

The fundamental trigger for the recent rally are reports that OPEC may extend the output cut well-beyond March, 2018.

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