The oil is still getting more expensive. Last Friday, the Brent futures contract price for December broke $60 per barrel and continues rising at the beginning of this week. The "bulls" clearly had enough time to "rest" during the weekend and right now are ready for new highs. The oil hasn’t been so expensive for more than two years – the current levels were last reached in July 2015. In early November, market conditions remain in favor of the oil buyers. It means that there might be more records in the future.
However, the "commodity bulls" really have reasons to be active. Last week, Mohammad bin Salman, the Crown Prince of Saudi Arabia, confirmed that he was in favor of extending the OPEC+ agreement after its expiration in March 2018. The document, which establishes strict borders and limits for the oil extracting countries, will expire in the first quarter of the next year. The organization has no plan B, but now Saudis joined Russia, the country that promoted the agreement for extension. Later, these countries might as well draw over other members of the organization, which are doubtful or undecided.
It’s quite clear that the borders of the agreement can’t last forever. But there are no alternatives right now, given that the document really proves to be effective and provides the slowdown of the oil demand. If the agreement is extended for another 6-9 months, the OPEC will have enough time to develop a new strategy how to exit the period of low extraction.
Additional support to the oil "bulls" is provided by political and geopolitical tensions in Libya and Iraq respectively. In this light, investors showed no interest in Baker Hughes reports, which indicated the decline in the number of the rigs in the USA (-4 units). The indicator has been falling for the fourth consecutive week and that’s another "bullish factor" for the market.
From the technical point of view, Brent is trading inside the uptrend. The short-term upside target may be at 61.35, which is close to the upside border of the mid-term channel. Also, we can’t exclude a possibility that the price may break the border and reach the upside target of the short-term channel at 63.50. But the most probable scenario suggests that the instrument may rebound from 61.35 and then resume falling towards 58.86, which provided significant resistance earlier and was located near the retracement of 50.0%.