UK Oil in Consolidation with Breakout Opportunities
Published On: 16 November 2021, 11:30 AM | Jeraldine Tan, Senior Dealer
UK Oil recently saw a strong retracement after a multi-month rally due to OPEC+ mentioning that they will increase production bit by bit which is putting a cap on oil price.
Upward momentum has dried out as the market is now exhibiting ranging price action with strong moves up and down from support and resistance zones. A short-term trader may seek to benefit from these uni-directional moves by putting limit orders to buy and sell at support and resistance zones.
On a higher timeframe though, the current range will look like a flag pattern where traders can look to trade a breakout and place stops above or below the most recent peak or trough respectively.
Fundamentally speaking, with economies recovering and airlines resuming flights with VTLs, the story for oil demand is getting rosier as refineries need to produce more det fuel, diesel and gasoline which in turn requires more crude oil.
The key will then be whether production increase mainly by US and OPEC+ will outpace demand growth, which at the moment looks unlikely and could be the reason why the market has been indecisive the last few sessions after the initial price drop following the OPEC+ announcement.
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