$Brent Last Day Financial - main 2311(BZmain)$ has reached the $90 per barrel, the first time since November last year.
1. What fuels oil prices continuting rally? Extension of production cut
Saudi Arabia has announced that it will extend its voluntary production cut of 1 million barrels per day for another 3 months.
Russia has also declared that it will continue its voluntary reduction of 300,000 barrels per day in oil supply until the end of December 2023.
2. Resistance and support level for oil prices trading as it hit new high
While oil prices are on a strong upward trend, the critical resistance level around $93-94 should not be overlooked.
There may be a risk of a bull trap if other risk assets do not advance further. The resistance near $83.5 for the year does pose some pressure, but the key medium to long-term turning point appears to be below $94.
3. How to trade oil futures in the current condition? Long or Short?
On the demand side, there may not be a clear logic for oil price recovery, which could limit the upside for crude oil. Even if a black swan event occurs, both crude oil itself and the turmoil and panic in other financial markets can impact oil price performance.
Based on the above assessment, we are more inclined to consider short positions at relatively high levels or at least to close long positions at the mentioned levels and wait and see.
4. Impacts on upcoming CPI?
The most challenging aspect for the Federal Reserve right now is that interest rates have been raised to their limits, yet inflation has not reached their target of 2% for medium-term control.
High oil prices are likely to become a significant driving factor for the inevitable entry of the U.S. economy into a recession.
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