Daily Market Recap – USOIL Prices consolidate despite OPEC production increase

Oil

prices are experiencing a roller coaster ride in the near term, with

the price of WTI consolidating below its $70 resistance reached last

week, due to the mixed outlook for the oil market.

O

the one hand, oil prices are being supported by OPEC+ production

increases of 400,000 barrels per day each month through the end of the

year, despite the Biden administration's call last month for a larger

production increase, and by improving health conditions in the U.S. and

China.

At

the same time, oil prices are suffering from a sharper slowdown in the

world's two largest economies, according to figures released in early

August. Citigroup's economic surprise indexes for the U.S. and the G10

have both fallen to their lowest levels since the pandemic began.

Economic

releases and health developments in major economic regions are expected

to be the two main drivers of oil prices in the coming weeks.

Positive economic surprises and improving health conditions would obviously be supportive of oil prices and vice versa.

From

a technical perspective, the underlying trend in oil prices has turned

bearish since this summer as evidenced by the channel in which the price

of WTI has been moving since July. Last week's renewed risk appetite

allowed the price of oil to return to test a major resistance below

which it had fallen in early August at around $69.60 and to approach the

upper bound of the descending channel.

Below

this resistance and the upper bound of the channel, the risk/reward

ratio favors sellers, but a bearish technical signal will be needed to

consider a continuation of the underlying downtrend.

The

Bollinger Bands will be one of the indicators that can signal the start

of a new downtrend. A downward breakout from the 20-period moving

average in the daily time frame would be a technical signal for a

bearish reversal.

 (Chart Source: Tradingview 02.09.2021)

Conversely,

if the Bollinger Bands and the descending channel were to break above

the resistance level at around $70, the short- and medium-term outlook

would be bullish again and a continuation of the upward trend to the end

of July peak at $74 would be expected.

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.