Having spiked higher last Friday, the oil prices have continued to decline this week. In the past 24 hours the slide has gradually become more significant as the crucial OPEC meeting has drawn ever closer. It looks as though the market is positioning for OPEC to announce no cut to their 30 million barrels of oil per day production levels.
Reports filtering out of fringe meetings in Vienna between the various interested parties have suggested that OPEC members appear unable to agree on production cuts and who would also be required to make the cuts. As this news has continued, the price of oil has breached support at $73.25 on WTI and $76.76 on Brent Crude (both broken overnight) and since continued to multi-year lows.
A press conference is pencilled in for 15:00GMT this afternoon by OPEC Secretary General El-Badri and if it confirms that no production cuts will be made, then the price of oil could continue to move considerably lower.
For WTI oil this means that the recent downtrend channel continues to drag the price lower, whilst also having used last week’s consolidation as a chance to renew downside potential. The next support is the $70.76 which is the August 2010 low, however a move towards the spike low at $64.24 should not be ruled out if momentum gathers to the downside should no cuts be announced.
For Brent Crude oil, the technicals all remain incredibly bearish whilst the next support is at $71.75, which is over 5% lower from current levels. Furthermore, the major support does not come in until around $68. This would suggest that in the event of OPEC announcing no production cuts, the downside potential for Brent Crude looks to be still fairly significant.
Brent crude oil is habitually trading at a small premium to WTI, however over the course of the past few months, the spread has tightened significantly. The current spread between the two prices is just under $4 (whilst the average spread throughout 2014 has been $6.73), so historically speaking the spread is quite tight. If WTI falls to test the $64.24 low, then it is perfectly possible to expect Brent Crude to test $68.