- Saudi Arabia and Russia’s production cuts are driving oil prices higher
- The cooling global economy could potentially impact the rally
- Momentum indicators continue to support the upward trend
The oil rally has been relentless and shows no signs of exhaustion. With a 15% increase in just three weeks, reaching levels not seen since last November and approaching triple digits, it has been an impressive move in the market, and there may be more to come.
Saudi Arabia and Russia have successfully tightened the oil market further, pushing prices above the levels they have been stuck at for most of the year. While there may be limits to their ambitions and willingness to continue with additional voluntary cuts, this will depend on demand in the coming months.
Although committed until the end of the year, if demand softens as the additional cuts expire, the price could cool slightly. The group has faced criticism for their cuts, but for the most part, prices haven’t increased as much as anticipated. This raises questions about whether the cuts have gone too far or if weakened demand will lead to price pullbacks.
Momentum Indicators Support the Rally
The momentum indicators at the bottom of the chart, specifically the stochastic and MACD, do not show any signs of divergence. This suggests that while the price could fall or correct lower, the rally remains healthy even after such a significant move. If the rally continues, it will be interesting to see if any divergences form as it approaches $100. Psychological factors often play a role in the markets, and this may be the case again.
Source – OANDA on Trading View
This is also the level where the price failed last October and November, with only a few brief moments above it. $98 may also be of interest as it has been significant in the past. However, at that point, much of the attention will be on whether the price can surpass triple figures once again and where it will go from there.
