The price of crude oil has been in a bearish trend for nine consecutive weeks from its June high of $123.60 per barrel to an August low of $86.50 per barrel.
“The downtrend possibly continues, as the market holds concerns over less demand due to the global economic slowdown, especially China’s downturn,” said Nhim Kosol, business manager at PP Link Securities.
However, on Tuesday’s trading session, the market started to price on the possibility of Organization of the Petroleum Exporting Countries and its allies (OPEC+) cutting oil production in order to stabilise the volatile futures market, he added.
Crude rose 3.7 per cent to settle above $93 per barrel, getting an extra boost from a dollar weakened by last month’s lower US service and manufacturing PMI data and slowdown in new home sales, according to forex-foctory.com data, Kosol said.
“Traders are weighing the potential of OPEC+ decreasing its crude output after Saudi oil minister Prince Abdulaziz bin Salman told Bloomberg futures prices are increasingly disconnected from fundamentals,” reported the global financial news organisation’s Julia Fanzeres.
Bloomberg said the group of 23 oil-exporting countries may be mulling a production decrease.
“Oil has undergone a tumultuous period of trading since Russia’s invasion of Ukraine in late February upended flows.
“OPEC+ has reversed all of the output cuts made during the pandemic, but Prince Abdulaziz suggested the cartel may need to tighten production again when it meets next month.
“Futures have lost about a quarter of their value since early June as escalating fears of an economic slowdown threaten the demand outlook,” said Bloomberg.
Based on technical analysis, Kosol indicated that oil price is trading in a major range of $85.50 to $95 per barrel, with the price of $90.50 per barrel a mean reversal point since early August.
For this week’s trading recommendation, oil investors can place a sell order at $95 per barrel, putting a stop-loss function at $97.50 per barrel and the first take-profit function at $90 per barrel, and the second at $86.