Bearish News Piles Up For Crude Oil

U.S. West Texas Intermediate are edging higher on Friday after OPEC and its allies moved forward with its plans for a gradual increase in production. Ahead of the decision, the group known as OPEC+, faced opposition from the United States and other major consumers, who wanted the producers to raise supply in order to cap prices.

Although the market is in a position to end the week with a higher session on Friday, the technical picture has turned slightly bearish In the meantime, traders are now facing the possibility of increased output from Saudi Arabia on top of rising supply concerns in the United States. Nonetheless, the outlook remains favorable because of growing global demand due to the pace of the economic recovery.

The wildcard next week could be the release of oil from the U.S. strategic reserve after OPEC+ rejected requests from the U.S. and other nations to increase supply ahead of winter.

OPEC+ Rebuffs US Call to Boost Output

OPEC and its allies agreed on Thursday to stick to their plan to raise oil output by 400,000 barrels per day (bpd) from December, ignoring calls from U.S. President Joe Biden for extra output to cool rising prices.

Top OPEC producer Saudi Arabia dismissed calls for speedier increases from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, citing economic headwinds, Reuters reported.

President Biden Blames OPEC+ for Sharp Rise in Fuel Prices

President Joe Biden has squarely blamed the reluctance of OPEC and its allies, to pump more oil for the sharp rise in energy prices in the U.S. and around the world.

"The idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not right," Biden said Sunday at the G-20 meeting in Rome.

U.S. Energy Secretary Jennifer Granholm even called on oil-producing nations to immediately increase crude supplies to mitigate the surging cost of living.

"The message is we need to increase supply at this moment so that people will not be hurt during the winter months," Granholm told CNBC's Steve Sedgwick on Friday at the COP26 climate summit in Glasgow, Scotland.

Looming Output Rise from Saudi Arabia New Wildcard

Although prices are moving higher on Friday, traders are taking a cautious approach after the market fell sharply the previous session as Saudi TV reported looming a looming output rise.

According to the report, Saudi Arabia's oil output will soon surpass 10 million barrels per day for the first time since the outset of the COVID-19 pandemic. The report, from Saudi-owned Al Arabiya TV, came after the nation, along with other OPEC countries, agreed to stick to previously agreed upon production increases.

US Crude Stockpiles Rise, While Gasoline Draws to Four-Year Low - EIA

U.S. crude oil stockpiles rose more than expected, but gasoline inventories dwindled to a four-year low on steady demand, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories rose by 3.3 million barrels in the week to October 29 to 434.1 million barrels, compared with analysts' expectations in a Reuters poll for a 2.2 million-barrel rise.

U.S. gasoline stocks fell by 1.5 million barrels in the week to 214.3 million barrels, the EIA said, putting those inventories at their lowest levels since November of 2017.

Weekly Technical Analysis

Weekly December WTI Crude Oil

Trend Indicator Analysis        

The main trend is up according to the weekly swing chart. However, momentum shifted to the downside with the confirmation of last week's closing price reversal top.

A trade through $85.41 will negate the closing price reversal top and signal a resumption of the downtrend. A move through $61.11 will change the main trend to down.

Retracement Level Analysis

The minor range is $61.11 to $85.41. The market is currently trading on the strong side of its retracement zone at $73.26, making it the nearest support.

The short-term range is $55.54 to $85.41. Its retracement zone at $70.53 to $66.99 is the best support area. This zone is controlling the near-term direction of the market.  

The main range is $37.70 to $85.41. If the main trend changes to down then its retracement zone at $61.56 to $55.93 will become the primary downside target and value area.

The retracement zone targets will move up as the market moves higher.

Weekly Technical Forecast

The direction of the December WTI crude oil market the week-ending November 12 will be determined by trader reaction to $82.19.

Bullish Scenario

A trade through $82.19 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a possible surge into $85.41. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $82.19 will signal the presence of sellers. Taking out $78.25 will indicate the selling pressure is getting stronger. This could create the downside momentum needed to complete a two to three week correction or test of $73.26

Short-Term Outlook

OPEC+'s move to raise daily output by 400,000 bpd did not shock the market. In fact, traders seemed to embrace it late in the week. The new concern is the expected rise in Saudi production.  

Traders will also be watching to see how the U.S. and other nations respond to OPEC+'s refusal to increase production. Friday's tentative trade may be a sign that traders suspect the U.S. will release oil from its strategic reserve in an attempt to drive prices lower ahead of winter.

We could see a volatile trade over the next week with some traders looking for a break into a value area at $73.26 and other wanting to buy strength in order to fuel a breakout over $85.41.