Oil turns from 4-year highs to plunge into bear market territory in just six weeks
What a remarkable turnaround for oil over the past month-and-a-half. At the highs in October, market chatter was talking about price heading towards $100 with Iran sanctions to come. Fast forward to today, we’re talking about potentially heading back towards $4X levels.
The oversupply issue is the main focus in oil right now and Iran’s sanctions failed to sap out production as anticipated, no thanks to US waivers of course. But as long as the focus remains on that and the technical chart continues to resemble that of a falling knife, it’s best not to catch the bottom.
OPEC+ members have been vocal about production cuts over the last few days but so far the market isn’t listening. Until there is any semblance of how much production they’re willing to cut and for how long they will commit to such cuts, a lot of these talks are merely conjecture.
Given that, I would still expect oil to weaken ahead of the December OPEC+ meeting in Vienna until rumours of real production cut values are being reported in the media. Right now, oil is resting on support from the 61.8 retracement level and November 2017 low. But just as how yesterday’s break quickly turned into a rout, we can expect a similar move once those support levels give way.
And when they do, next stop is $50.