Despite hitting its lowest level in over a year earlier in the week, crude oil is showing signs of stabilizing. This is perhaps an early indication that the worst of the selling may be over. With crude oil, sentiment is being influenced by expectations of production cuts by OPEC and its allies.
U.S. West Texas Intermediate crude oil futures is currently in a position to post a potentially bullish technical closing price reversal bottom on the weekly chart. Helping to form the chart pattern is Thursday’s rapid reversal to the upside on the daily chart. This move was fueled after industry sources said Russia had accepted the need to cut production, together with OPEC ahead of its meeting in Vienna on December 6-7.
At the start of the week, crude oil was in a position to post one of its biggest one-month declines in November since the worst of the financial crisis in 2008, having dropped about 22 percent so far. Primarily driving the price action this month has been increasing supply by the United States and Saudi Arabia.
Russia Changes its Tune
After U.S. crude oil fell below $50 for the first time in over a year, the news hit that Russia would consider joining OPEC and other producers to cut output. This triggered the technical reversal in the markets.
The reaction by traders to the news about Russia was primarily driven by short-covering, but nonetheless, it is a good sign that the buying may be greater than the selling at…