- The West Texas Intermediate Crude Oil market has been indecisive during Tuesday's trading session, as it hesitates just below the 200-Day EMA.
- The market gapped at the beginning of last week when OPEC decided to cut production by 1.6 million barrels a day, but there has been no follow-through.
- This lack of follow-through is not a bullish sign, and it raises the question of why OPEC decided to cut production in the first place.
Crude Oil Markets Will Fill the Gap
OPEC's decision to cut prices is a clear indication that the global economy is going to struggle, which makes it unlikely for oil to continue taking off to the upside, as the supply/demand equation will not favor it. While it is not impossible for oil to continue rising, it is worth noting that the 200-Day EMA has been a brick wall at the top of the previous consolidation area. It is expected that the market will fill the gap, but this will only happen if the lows of the last couple of days are broken below.
Similarly, Brent markets fell into the same trap, gapping higher and then doing nothing. The market is sitting just below the 200-Day EMA, but it did not quite reach the top of the overall consolidation area. The market is expected to fill the gap sooner rather than later, and it is surprising that this hasn't happened yet. However, the market is likely to see a lot of noise, but most futures traders know that gaps tend to get filled sooner or later. Brent would then be testing the $80 level, which is a significant, round, psychologically significant figure.
The global economy does not look very healthy at this point, so oil demand is going to continue to be a major problem. It is important to be cautious when investing in oil, and to pay attention to any changes in production or demand. The key is to exercise patience and wait for the market to show its hand before making any major moves.
Ultimately, the oil market is experiencing volatility, and there is a lack of follow-through after OPEC's decision to cut production. The global economy does not look very healthy, which makes it unlikely for oil to continue taking off to the upside. It is expected that the market will fill the gap, and Brent would then be testing the $80 level. It is important to be cautious when investing in oil, and to pay attention to any changes in production or demand. The key is to exercise patience and wait for the market to show its hand before making any major moves.
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