WTI struggles to break above the 100-day moving average
Is the oil price rally since the start of the year coming to an end? That's tough to say but before we get into the details on that, let's look at what the chart is telling us. Buyers have been on a solid run since January and price initially stalled around $54.00 before moving up to test the 38.2 retracement level @ $55.55.
The first attempt to break above that failed but buyers gathered new momentum before breaking above it last week to now test the 100-day MA (red line). Price continues to trade around this level for the past few sessions as sellers are leaning on the level to maintain a more bearish bias in the bigger picture.
So, what's next for oil?
Much of the recent rally can be attributed to OPEC+ supply cuts as well as the sanctions applied to Iran and Venezuela. The latter situation will be a tailwind for oil this year and the fact that risk sentiment continues to hold up well - trade talks making progress - is helping to underpin prices as well.
However, the key factor for oil has always been OPEC+ decisions. And it's now a question of whether OPEC+ members will decide to continue with production cuts in April. The two key dates to watch out for in the next months will be 17-18 March and 17-18 April.
OPEC+ members will be meeting in Baku during March to review the production cuts before meeting again in Vienna during April to decide if those cuts should be extended beyond the current expiry date in the summer.
Oil buyers have done well but I'd be wary of any real break above the 100-day MA and if it does come about, $60 would be an area I'd expect sellers to lean on ahead of uncertainty surrounding the OPEC+ decision.
Technically, a break above the 100-day MA is a positive signal for buyers but unless it is accompanied by supportive fundamentals, I don't see the break lasting for long.
As it stands, Russia isn't really playing its part well since the deal in December. It's basically just Saudi Arabia pulling all the weight thus far. Hence, if Russia does back out in April, expect oil prices to suffer thereafter unless OPEC members can scrape some other meaningful agreement - which is highly unlikely.
