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Firmer Dollar Overshadows Speculation over OPEC's Output Cut

Nov, 18th 17:18

WTI crude ticked higher on Friday, heading for its first weekly gain in the last four week amid hopes that the Organization of the Petroleum Exporting Countries (OPEC) might agree to curb oil production at the end of the month.

According to market sources, OPEC is on track to finalize its first deal to limit output since 2008. OPEC members gathered on the sidelines of a gas forum in Doha on Friday to discuss about the tentative deal they reached in September and attempt to set production limits for individual countries.

Reuters reported that Iran was proposed to cap its oil output at 3.92 million barrels per day (bpd) at the meeting. Tehran had yet to respond to the proposal. However, its OPEC governor, who attended Friday’s talks, said he was optimistic that the cartel could reach a deal when it gathers formally in Vienna on Nov. 30.

After meeting with OPEC members, Russian Energy Minister Alexander Novak said he was more confident an output deal could be reached between Moscow and the group to help to boost oil prices.

A stronger dollar restrained the oil’s rally on Friday as it makes oil more expensive in other currencies. The greenback has strengthened since Federal Reserve Chairwoman Janet Yellen’s testimony on Thursday which bolstered expectations that the central bank will raise interest rates next month.

Other Fed officials also expressed hawkish sentiment towards the U.S. rates. Speaking at a press conference on Friday, New York Fed President William Dudley stated that the post-election market reaction is not concerning in terms of planned interest rate rises. He also added that “The movement in markets seems consistent with the change in expectations of how economic policy might evolve”.

St. Louis Federal Reserve President Bullard, who is a voting member of the U.S. central bank’s rate-setting committee, contributed to fueling the dollar, saying that he is leaning toward supporting an interest rate increase in December.


Fig: Oil D1 Technical Chart

Crude oil scaled back from the support at 44.50 but the upside seems limited as prices have been restrained by the resistance at 23.6% and the short-term MA20. Long upper shadows in the last three candles show a strong bear that have prevented buyers to push the price higher. WTI crude price may retest the support at 44.50.

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Buy Digital Put Option from 45.00 to 44.60 valid until 20:00 GMT November 18, 2016

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