Summary:

• Brent Oil sits at pivotal level ahead of API and DOE releases
• Saudi determined to end oil glut
• OPEC said to work on exit strategy from supply cuts

 A slide seen in Brent Oil this afternoon has seen the benchmark fall back lower and price is currently sitting at a potentially pivotal level ahead of the weekly inventory data from the US. Tonight will see the private API inventory data released before tomorrow’s more widely viewed DOE equivalent. The DOE data is expected to show a drop of 2.7M barrels which would mark the 5th consecutive decline in US stock piles. The API number can also act as a benchmark of sorts for the DOE release and the relative difference seen in the DOE from the API number can often be  key in determining the market reaction. 

From a fundamental standpoint news out of Saudi Arabia today is seemingly supportive of price with the world’s top oil exporter stating that it is determined to reduce inventories further. The kingdom aims to do this through its OPEC-led deal to cut production and Saudi Energy Minister Khalid-al-Falih said during an investment conference in Riyadh that the focus remained on reducing the level of oil stocks in OECD industrialised countries to their five-year average. 

OPEC is scheduled to meet next month and expected to announce an extension of their current production cuts until 2018. In addition the organisation have reportedly started working on an exit strategy from the current measures in an effort to reassure investors that it won’t flood the market once the cuts finally expire. 

 Brent Oil has been in a clear uptrend in recent months as defined by the 8 and 21 EMAs. However, price has now fallen back between these two trend indicators and any more downside could lead to a bearish cross. Source: xStation

Brent Oil has been trending higher since the early summer, with the 8 and 21 period EMAs clearly defining the chart on a daily timeframe. Throughout these last few months the 8 has been clearly above the 21 and price has spent the majority of the time above both. However, after hitting a 2 and a half year high of 58.86 last month the move higher has paused and the recent weakness has seen price pull back to these two EMAs. If buyers can step in and keep price above these trend indicators then further gains may lie ahead with a break above 58.86 paving the way for a larger breakout trade. Alternatively a rejection here could lead to a trend change and a bearish cross in the EMAs would be a negative signal that may see a larger pullback. 

Brent Oil is one of two global benchmarks for the price of oil, with the other being Oil.WTI. We earlier provided a technical overview of Oil.WTI which can be found here.