Landfall of the hurricane Ida on the US Gulf Coast over the weekend caused a jump in volatility on the oil market at the start of this week. However, situation has calmed since and market started to trade sideways. This reflects uncertainty ahead of the OPEC+ meeting scheduled for 4:00 pm BST today. There is a feeling in the markets that oil producers will keep their policy unchanged and continue to bring back production at a pace of 400k bpd per month. However, as the Delta variant is raging across the world and some countries, especially in Asia, decided to reimpose pandemic restrictions. This is a hit to demand for oil as mobility drops. However, it is uncertain how big that hit would be. Having said that, OPEC+ could change its policy and use resurgence of coronavirus as an argument. Nevertheless, it is not the base case scenario. Traders should also keep in mind that DOE report on oil inventories wil be released at 3:30 pm BST today and may contribute to elevated volatility.
Taking a look at Brent (OIL) from a technical point of view, we can see that price is attempting to break above the $72.15 area that marks the upper limit of this week’s trading range. Should bulls succeed, the next resistance in line will be the downward trendline. However, the key resistance can be found slightly above the trendline. Zone ranging around the 78.6% retracement of the downward move launched in early-July is additionally strengthened by the upper limit of market geometry and may turn out to be a challenge for bulls.