US oil rallied strongly on Monday, extending recovery leg from $43.74 spike low, boosted by agreement between Saudi Arabia and Russia to extend oil production cut for a further nine months. Top oil producers showed strong commitment to extend an existing deal in order to reduce global oil oversupply and stabilize oil price. However, the agreement needs verification on OPEC’s May 25 meeting, with strong expectations that agreement will be supported by other oil producers. Oil price rallied over 3.5% since opening in Asia until early hours of American session, taking out important barriers at $48.74 (daily Kijun-sen and 20SMA) and cracking another strong obstacle at $49.30 (200SMA). Near-term focus turns towards key resistances at $49.92/$50.00 (Fibo 61.8% of $53.74/$43.74 descend, reinforced by 55SMA and daily cloud / psychological barrier), break of which would generate another strong bullish signal for extended recovery. Close above these barriers is needed to confirm bullish resumption. Daily MA’s are gradually turning into bullish setup, with bullish momentum building up and supporting growing bullish sentiment in the market. On the other side, slow stochastic is strongly overbought on daily chart and suggests hesitation at pivotal $50 zone, however, no firmer bearish signal has been generated so far. Corrective dips should be ideally contained by broken 20SMA/daily Kijun-sen to keep near-term bullish structure intact.
Res: 49.92; 50.00; 50.20; 51.03
Sup: 48.74; 48.20; 47.73; 47.33
