• Review: Range bound within US$42-52 barrel in a choppy market: Crude prices have swung in recent weeks as OPEC members appear to be at an impasse toward any agreement on either a cut in production quotas or an agreement to freeze production at existing levels to rein in a global glut. To recap, WTI tumbled 18.7% from a 3M high of US$51.93 (19 Oct) to a low of US$42.2 (14 Nov) following a record weekly build in U.S. crude stocks which added to worries of all-time highs in OPEC production. Meanwhile, the record high USD index has also made the dollar-denominated commodity less appealing to investors.
   
• Besides, market participants continued to sort out the implications of the Trump unexpected victory in the US election. Trump, who will take office in January, has said he wants to make the U.S. completely energy independent and remove restrictions on oil drilling on federal land, which could lead to a larger glut of supplies and lower prices.? Despite the negatives, oil prices surged 4.2% overnight as Iran signaled optimism that OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster unity before next week’s meeting in Vienna.
   
• Technical outlook: Uptrend remains intact to retest $50-52/barrel. Following the recent 14.5% relief rally from $42.2 to close at $48.3 overnight, WTI is expected to trend higher ahead of the OPEC meeting in anticipation that a supply cut deal among OPEC members, supported by bullish indicators. Immediate supports are $47.6, $46.0 and $44.5 with crucial floor at $42.2. As long as the $42.2 support is not violated, we remain optimistic that WTI may gain traction above $50/barrel, with formidable resistances at $51.93 and $53.89 (10 July high), supported by the weekly uptrend channel amid uptick in indicators.

Source: Hong Leong Investment Bank Research - 22 Nov 2016