Oil Slips Ahead of OPEC+ Meeting

Oil rig on an grey day
Matt Simpson financial analyst
By :  ,  Market Analyst
Energy markets have been under pressure in the last 48 hours


Oil prices fell to a 4-week low overnight as US crude stockpiles rose more than expected. Crude inventories rose by 3.3 million barrels last week, more than the 2.2 million barrels expected, although the rise is partly due to the 200k barrels per day (bpd) increase of overall US crude production which now sit at 11.5 million bpd. Furthermore, gasoline inventories were down 1.5 million barrels last week, taking total to a four-year low of 214.3 million barrels. Demand remains strong despite the higher prices. WTI crude fell -3.6% by the close and is down a further -0.6% at time of writing, whilst brent fell -3.2%.


OPEC+ up next

The main focus for oil traders will clearly be today’s OPEC+ meeting. Despite calls form the US for OPEC nations to increase their output, it has effectively fallen on deaf ears. The US (and rest of the world) are feeling the inflationary forces of higher oil prices, enough so that it is making an impact on monetary policy decisions to the point it is now political.

Citing risks of the coronavirus pandemic and rise in oil inventories, Saudi Arabia’s oil minister has said “we are not yet out of the woods” as the crisis isn’t necessarily over. This means OPEC+ are expected to stick to their plan of increasing production by 0.4 million barrels per day each, despite the surge in energy prices.

To expect any meaningful volatility today we may need to see OPEC increase production at a much faster rate, thus weighing on oil prices which are sitting around $80. But this is an outside chance. If they stick to the plan we could expect oil to recoup some of yesterday’s losses, whilst a surprise cut could spur a rally for oil prices.


Chop until you drop

We had raised concerns that the bullish rally on oil prices were headed for some big resistance levels. Moreover, we expected choppy price action around those highs until it either corrected or had paused for long enough and found a new catalyst to resume its trend.

So far WTI is on track for its second consecutive bearish week unless it close above 83.57 tomorrow. Should it close around current levels then the weekly chart will have a 3-week bearish reversal pattern called the Evening star, painting a bearish bias on that timeframe.

WTI futures fell to $80 yesterday, during its most bearish session in 3-months


If we switch to the daily chart its bullish trend remains apparent despite its volatility of late. Prices are holding above $80 (although beneath its bullish trendline) so $80 is clearly an important level today. For example, $80 could be used as a springboard to recoup some of yesterday’s losses, if OPEC+ do not deviate far form their plan. Using intraday price action (below), we note that 81.00 – 81.50 and 82.50 make viable targets / resistance zones, with stronger resistance likely residing around $83.0.

However, should OPEC+ surprise markets and notable increase output as the West have repeatedly requested, we would expect WTI to fall below $80 and head back towards the October 2018 high around 76.90. Just take note that there was some strong buying activity around 79.15 at the beginning of October so that may act as an interim support level.

Here are you intraday support and resistance zone for WTI ahead of today's OPEC meeting


  • If prices hold above $80 then near-term bullish target is the 81.00 – 81.50 resistance zone.
  • Equally, this zone could tempt bears to load up if OPEC+ increase supply more than expected
  • However, a surprise supply cut prompting a more volatile bullish reaction and a break above 81.50 pave the way for a run to 82.50 / 83.00
  • Should bears retain control, immediate support resides around 79.15 – 79.40, but we’d want to see a break beneath this zone before expecting any decent bearish follow through


The weekly EIA report saw crude stocks rise


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