KTM Commodity Weekly: Scanning for bullish factors-update

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Opened weak overnight but gain momentum into the close, following two days of heavy falls. 

Crude oil prices are under renewed pressure, with Brent now down about 20% from its recent high reached in August. Headlines concerning spikes of new COVID-19 cases in Europe, the U.K., and the U.S. are the catalysts behind the recent fall.

At the opening in November, the price fell nearly 4% but later recovered into close by 4.60%. This fall was the first strong green candle printed after twelve trading sessions. News from Russia was the catalyst behind this surge.

Russia media cited that, “Novak to discuss OPEC + deal with heads of Russian oil companies.” Prime reported that Russian Energy Minister Alexander Novak on Monday would discuss with the heads of Russian oil companies an agreement to cut OPEC + oil production, sources in several companies told RIA Novosti. In our last week’s article, we noted that we are scanning for bullish factors.

Finally, we found three. Here you go…

1. The daily RSI is pointing to a positive divergence, and the price action suggests a double bottom at $38.80 on a closing basis.
2. The price holds the 38.2 fib reaction at $36.20
3. The C point of A-B-C corrective structure is located at $35.80. Overall, thick congestion between $35.80-$36.20 levels.

If the price starts moving, watch out for the resistance at$41.70, which was earlier support. Readers note that the upcoming 2020 U.S. election outcome will significantly impact the short-term oil trend.

• ING said, “A Biden victory could see the U.S. taking a less hawkish stance with Iran, and so raising the possibility that we see oil sanctions against Iran removed. While it is still unclear how high Iran would be on Biden’s priority list, a win for the Democrats could put some downward pressure on oil prices, with the possibility of 1.5-2MMbbls/d of oil supply returning to the market over time.”

The oil market is already experiencing oversupply with the latest Libyan supply. The second lockdown in European countries will lead to a sharp economic contraction, which means less oil demand. The combination of these divergent factors will cap oil prices in the near term. But how low it can go will be dictated by the U.S. election outcome.

View: Stay neutral for one more day.

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