By Bhavik Patel
OPEC+ is set to meet on Monday but there is little chance of any production cut as oil has smartly recovered. Even though prices were falling due to the banking crisis, OPEC had sent clear signals to the market that they will be staying the course and will not react to any sudden price crash. OPEC is also not in any position to cut their production as there is oil loss to the tune of 4,00,000 bpd from Iraq over a dispute between Turkey and Iraq in the Kurdistan region.
So there is surplus in the market despite growing demand from China. China, world’s second largest consumer of crude oil, has been on the path of expansion as its factory activity came higher than expected which again will boost crude oil prices. US crude oil stockpiles have also fallen to two year low giving bulls some ammunition. It will take a couple of years for the US to fill their strategic petroleum reserves.
Crude oil has recovered 70% of the loss it made at the start of March following the bank’s crisis of SVB bank and Credit Suisse. After briefly touching its oversold region, the momentum oscillator has recovered sharply (RSI_14) to 53 but the trend remains bearish as price action is of lower high and lower low on daily scale. After 4 sessions of strong up move, pullback is expected. At the moment, price is taking resistance at the 50-day moving average. Any leveraged long position should be avoided and one can start accumulating short around 6300 for expected downside target of 6000 and stoploss of 6400 closing basis.
(Bhavik Patelis a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult yourfinancial advisor before investing.)