Crude oil prices rebounded for a fourth consecutive day, registering a nearly 8% gain from last week’s low as market started to digest and price-in hope that OPEC and other producers will extend the cut for another six month beyond June. 

How much longer will the news drive the oil price’s rally is a question to be answered by the market itself. Technically, short term indicator including 10-Day Moving Average line and MACD has turned bullish (see chart below).  The Fibonacci Extension suggests that the near term support and resistance lines can be found at around US$48.7 and US$51.7 respectively. Another indicator SuperTrend (10. 2) has swung from downwards to upwards, signalling a bearish reversal.
 
Crude Oil WTI - Cash


 

Over the past six months, higher crude prices as a result of the OPEC cuts encouraged more US shale production and surge in rigs operation. According to Baker Hughes rigs count, the number of US rigs has climbed to 824 as of 1st Apr, up from 450 just a year ago, despite of a fall in the overall international rigs count. US commercial inventories are building up at a faster-than-expected pace too. These figures worry investors that an increase in output from the US will likely offset OPEC’s production cut and therefore send oil prices lower.

 Source: Baker Hughes


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