Volatility settled over the weekend with the OPEC countries considering extending their production cut for another nine months.
President Trump’s first foreign visit – starting with Saudi Arabia, then Israel and other Muslim countries – appears to be yielding fruitful results. US equities rebounded for a second day on Friday, as the market focus shifted from Trump’s FBI scandal to his first overseas tour, and the OPEC meeting this week.
Saudi Arabia-led OPEC and Russia had agreed last year to curb supply by 1.8m barrels per day for six months. Both leading countries have backed extending the agreement to cut output until March 2018, in an attempt to support prices and curb inventory.
Over the last two weeks, the oil price has rebounded to above $50 per barrel on this expectation. However, in the medium term there remains the concern that the higher prices will attract more production from North America. If by any chance the oil price were to surge beyond $60 per barrel, this could be the catalyst for more drilling, and lead to a boom in US shale oil production, which in turn will break the supply-demand balance again.
A big slump in the US dollar last Friday also helped to support commodities prices. Oil, gold and silver jumped 2.5%, 0.6% and 1.5% respectively.
Technically, WTI crude oil is facing resistance levels at $51.7 (50% Fibonacci) and $54.7 (61.8%) respectively.
WTI Crude Oil - Cash
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