OIL : Overbought

(Wed, 25 Nov 2020). The price of carves a series of higher highs and lows ahead of the Thanksgiving holiday as it trades to a fresh monthly high ($45.20), and the recent rise in crude prices may gather pace as the Relative Strength Index (RSI) breaks out of the downward trend from earlier this and approaches overbought territory.

It remains to be seen if OPEC’s last meeting for 2020 will influence the near-term outlook for crude as Secretary General Mohammad Barkindo warns that “the oil market today is overshadowed by the resurgence of COVID-19 and a slower pace of economic recovery than we had envisioned in the second half of the year” while speaking at the Crescent Ideas Forum.

Nevertheless, Barkindo goes onto say that “the outlook for crude oil may look anemic now, but we anticipate a gradual normalization of demand growth as the world recovers from the COVID-19 shock,” and the comments suggests OPEC and its allies are in no rush to further rebalance the energy market as US production remains around its lowest levels since 2018.

However, the latest figures from the Energy Information Energy (EIA) showed field production of crude increasing for the first time since the end of October, with output climbing to 10,900K in the week ending November 13 from 10,500K the week prior. A further recovery in US production may drag on oil prices amid concerns of protracted economic recovery, but the move above the August high ($43.78) brings the March high ($48.66) on the radar as crude breaks out of the range-bound price action carried over from the third quarter.

The Relative Strength Index (RSI) highlights a similar dynamic as the oscillator breaks out of the downward trend carried over from June, and the indicator may show the bullish momentum gathering pace if the oscillator pushes into overbought territory for the first time since 2019.

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