OIL : Overbought Territory

(Fri, 18 Dec 2020). The price of crude takes out the March high ($48.66) as it continues to track the upward trend carried over from November, and recent developments in the Relative Strength Index (RSI) point to higher crude prices as the indicator pushes into overbought territory for the first time since 2019.

OIL PRICE CLEARS MARCH HIGH TO PUSH RSI INTO OVERBOUGHT TERRITORY

The price of oil trades to a fresh monthly high ($48.80) as fresh data prints coming out of the US instill an improved outlook for crude consumption, with oil inventories contracting 3.135M in the week ending December 11 versus forecasts for a 1.937M decline.

At the same time, the update for the Energy Information Energy (EIA) showed field production narrowing to 11,000K from 11,100K in the week ending December 4, and persistent signs of subdued supply may keep crude prices afloat amid the tepid recovery in US output.

At the same time, it seems as though the Organization of the Petroleum Exporting Countries (OPEC) will continue to regulate the energy market next year as the group pledges to “voluntary adjust production by 0.5 mb/d from 7.7 mb/d to 7.2 mb/d” at its last meeting for 2020, and the ongoing commitment to the Declaration of Cooperation (DoC) may continue to act as a backstop for crude as the price of oil continues to track the upward trend established in November.

With that said, the price of oil may continue to retrace the decline from the start of the year as it clears the March high ($48.66), and recent developments in the Relative Strength Index (RSI) suggest the bullish momentum will gather pace over the coming days as the indicator pushes into overbought territory for the first time since 2019.

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