FxWirePro Short Term Outlook: Revisiting oil bear call in response to Saudi comments

We, at FxWirePro, discussed the oil outlook as it was struggling around $50 and suggested if the bulls fail to break key $52 per barrel resistance and the bears take control, WTI crude may decline towards $40. The call is available here, http://www.econotimes.com/WTI-at-critical-juncture-as-bulls-fight-for-$60-and-bears-for-$40-225206. We later extended that target towards $35 per barrel.

WTI has been declining as expected and was heading towards the target. It dropped to as low as $39 per barrel before a bounce back. However, that bounce back is now getting extended as two fundamentally moving news has hit the market this week.

• On Monday words came out that the OPEC members will be holding an informal meeting later next month on the sidelines of the biennial meeting of the International Energy Agency in Algeria.
• Today a mistakenly leaked email showed that Saudi Arabia’s energy minister talking on coordinated actions if necessary to balance the market.

In response, we think there is a need to revise the oil outlook of ours. It’s not that we believe that the Saudi Arabia will take coordinated actions along with OPEC and non-OPEC members, as a matter of fact, we think there would be no coordinated action but such comments can once more push the oil price into a consolidation phase. The oil even if doesn’t enter the bull market, may go far a larger bounce and go for a test of $52 key resistance.

Hence, we urge caution. The call is still within the money and for some traders, it could be suitable to cash in the profits. As of now, however, there are no signs as of now, that the oil price would break above our given resistance area around $35.