Iran is Out – Review IRONFOREX
Oil prices plunge Iran’s oil minister described the Saudi-Russian oil freeze proposal as “ridiculous” yesterday. He said that should Iran’s oil production fall, it will be overtaken considerably by neighboring producers.
Oil prices tumbled immediately on his comments and fell even further a few hours later after Saudi Arabia’s oil minister stated that production cuts will not happen.
We believe that we would need to see some control over the supply side of the market before oil prices begin to stabilize. But for this to happen, more negotiations are needed, perhaps an emergency OPEC meeting, as the next scheduled is in June.
Nevertheless as this is unlikely to happen any time soon, we expect oil prices to continue falling, given that Iran wants to boost its output further.
In the long run though, persistent low prices could force some producers to exit the market as it would be unsustainable to continue producing below cost.
In such case, the supply side would balance itself. The question now is how low oil prices would need to go and for how long they will need to stay there, until this happens.
WTI tumbles below 31.65 – Review IRONFOREX
• WTI hit resistance near the 33.50 (R2) line and then it tumbled to break below the support (now turned into resistance) line of 31.65 (R1). In my view, this turns the intraday bias back to the downside and therefore, I would now expect the bears to challenge the 30.65 (S1) line, defined by the low of the 16th of February. A break below that zone could initially aim for our next support of 29.80 (S2). Our short-term oscillators reveal downside momentum and support the notion. The RSI slid after it fell below its 50 line, while the MACD, already below its trigger line, has just turned negative. On the daily chart, I see that WTI has been printing lower peaks and lower troughs since the 9th off October, which keeps the longer-term picture negative as well.
• Support: 30.65 (S1), 29.80 (S2), 28.70 (S3)
• Resistance: 31.65 (R1), 33.50 (R2), 34.40 (R3)