WTI crude is right up against the 2016 highs
The rule of thumb is that a triple top is just a double-top that's about to be broken.
WTI is testing the double top from the June and October highs in WTI crude oil. The highest peak was at $51.93 on October 19. The high today was $51.80.
Here's the conundrum on the fundamental side:
The OPEC agreement came way too easy. My guess is that rather than bickering amongst themselves and sending oil down to $35, the key OPEC members decided to agree to quotas that they don't intend to follow. Historically, that's what has happened almost every single time.
But how do you trade that?
There is always the chance they actually follow the quotas, so you have to respect that.
Second, at least a few of them will follow it to some degree, so there is less oil in the market.
Finally, the cuts don't even take place until January so there is an entire month where we won't have any idea.
So I just don't see speculators in the market mustering the courage to sell oil.
Then there are producers. For them, this OPEC deal is like Santa Claus -- it's better to believe. They have the option of selling and hedging at these prices, but will they hold out for better? My guess is that they will. At the margin, most of them will give OPEC some benefit of the doubt and wait to see how if the quotas are respected.
So add it all up and I think the path will be ultimately higher from here but the trade isn't to buy until crude breaks $52, or retraces back down to $49/$50.
