Oil jumps to 200-DMA on the prospects of longer extension of the output cut deal

Brent oil neared the 200-DMA level of $51.72 after news hit the wires that Russia and Saudi Arabia are in favour of extending the output cut deal till March 2018.

Trades at two-week high

The corrective rally from the low of $46.68 was looking exhausted in the last two trading days mainly due to the rise in the US oil rig counts (reported by Baker Hughes on Friday) and the OPEC’s upward revision of the non-OPEC supply forecast. The Cartel also kept the 2017 oil demand growth forecast unchanged at 1.27 million barrels per day.

But, the bullish comments from Saudi Arabia and Russia helped Brent chew through strong resistance around the $51.00 handle. The front-month futures currently trade at the two-week high of $51.60/barrel.

Brent Oil Technicals

The daily RSI is at neutral (50) levels with prices stuck at 200-DMA level of $51.72. A daily close above the same would lift RSI into the bullish territory, thus opening doors for $52.57 (Apr 28 high) and $52.81 (61.8% Fib R of 56.62 - 46.63).

On the other hand, a breakdown of support at $51.13 (May 11 high) could yield a pullback to $50.25 (May 11 low) and $50.00 (zero figure).