Oil is having a positive start to the year as OPEC appears to be delivering on their pledge of production cuts. Earlier in Asia, crude prices were heavy as disappointing data from China confirmed weakness in the second largest economy was accelerating. West Texas Intermediate fell to the session low after Russian production for December rose 4.5% to a record high of 11.45 million barrels per day, slightly more than 11.42 million bpd that was speculated in the middle of last month. Russia is not an OPEC member, but has agreed to cooperate with production cuts with OPEC and their allies.
The strong rebound in oil stemmed initially from the positive move in risk appetite during the New York open. The rise in prices accelerated after news that OPEC’s oil output in December fell the most in two years. The focus was on Saudi Arabia, who delivered 420,000 barrels per day in cuts to 10.65M bpd. OPEC production fell by a total of 530,000 bpd to 32.6 million bpd.
The Canadian dollar is also firmer by 0.5% to 1.3581, last year was the loonie’s worst performance to the greenback in three years.
The pummeled commodity is now extending its gains from the key Christmas Eve low of $42.36. That low was made on thin volume and could be the bottom for oil prices in the medium-term. The WTI daily chart shows that if bullish momentum continues, it could find resistance at the $49.70 level. It is around that area that price could form a bearish Gartley pattern. Point D is targeted with the 70.7% Fibonacci retracement level of the X to A leg and the 200% Fibonacci expansion level of the B to C move. If valid, we could see a pullback towards the $46.90 region. If the reversal pattern is invalidated, key resistance will come from the $52.50 level.