• Review: WTI rebounded 21.3% from a monthly low of US$42.55 (20 Sep) to a high of US$51.60 (10 Oct) after OPEC took a step toward coordinated supply curbs with Russia last week and will meet for a “technical exchange” to set a road map for output levels later this month. Oil prices were also supported by an unexpected five consecutive weekly drawdowns in US crude stockpiles before increasing again in the week ended 7 Oct.
• After a strong rally, oil prices eased 0.2% last Friday as the greenback rose the 4thtime in five days, making dollar-denominated commodities less appealing to investors. Sentiment was also dented by EIA report that the U.S. crude supplies increased 4.9m barrels last week (after 5 consecutive weeks of drawdowns). Traders’ also remained skeptical that a planned oil output cut by the OPEC and potentially non-OPEC member Russia would be sufficient to rein in a global production overhang which has been ongoing for two years and still stands around half a million barrels per day (bpd) in excess of consumption.

• LT uptrend remains intact but near term sideways consolidation. Similar to the previous few sessions, WTI is expected to trade cautiously in sideways pattern today amid flattish daily indicators, ahead of the OPEC Vienna meeting on 30 Nov. Immediate supports are US$48.75 and US$47.75.

• As long as the US$47.75 support is not violated, we remain optimistic that WTI may inch up further towards US$51.60, US$53.89 (10 July high) and US$54.64 (76.4% FR) levels in the coming weeks, supported by the weekly uptrend channel amid uptick in indicators.

• On the flip side, failure to hold at US$47.64 support will witness potential fall back towards the weekly support trendline near US$45.00 and US$43.16 (lower Bollinger band) levels again.

Source: Hong Leong Investment Bank Research - 17 Oct 2016