What’s Happening? Crude oil, both Brent and WTI, have staged huge rebound rallies since completing double bottoms back in February. The spread between the two contracts has narrowed to nothing as both have approached $50.00 a big round number psychological level last seen back in October. In addition to the technical test, oil could be active on supply-side comments and developments around Thursday’s OPEC meeting. Technicals: An 18 month downtrend in WTI crude oil ended in February when it completed a double bottom near $25.50. A hammer candle appeared at the bottom confirming a reversal while a positive RSI divergence indicated downward pressure was past its peak. For the last three months, oil has been steadily recovering with a recent golden cross of the 50-day average up through the 200-day confirming the start of a new uptrend. Recently, WTI has approached the $50.00 level a big round number which has emerged as resistance. An overbought RSI suggests Oil may be due for a pause or correction in the near term within the context of a larger recovery trend. Initial downside support appear near $48.10 a Fibonacci level then $46.85 and $45.00. upside resistance may appear near $50.60 initially. Fundamentals: Oil’s recovery has been driven by a combination of falling US production/supply and improving global demand as economies improve, especially in the US. Last week the focus was on stockpiles with big 5 mmbbl drops in API and DOE crude inventories propelling WTI toward $50 and nearly completing a double off the bottom. This week the focus may be back on supply. Oil sands operations in Canada continue to return to production from wildfire shutdowns while Nigeria production remains at risk from terrorist activity. This week the spotlight turns back to OPEC who is having a regular meeting on Thursday. Since a production freeze deal with Russia fell apart in April, expectations for anything to come out of this meeting in terms of production quotas has been very low. Still the meeting could provide a forum for comments from oil ministers which could influence short-term trading. A bigger question for crude is what price would be enough to encourage US shale companies to put production back on stream or start exploring again? At that point, renewed US production could limit the upside for oil unless we get production cuts elsewhere. The market share war among suppliers hasn’t ended and could still influence trading moving forward. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.