The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, is up nearly 13% over the past month and after oil prices hit their highest levels of 2016 yesterday, some traders are looking at the commodity as a prime candidate for a pullback.
Some of the world’s largest producers continue to pump crude at record levels, with the Organization of Petroleum Exporting Countries maintaining Saudi Arabia’s strategy of squeezing out high-cost competitors.
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While some in OPEC tried to set a new collective ceiling in a bid to support prices, the Thursday meeting ended with no new policy or ceiling amid resistance from Iran, Reuters reports. Nevertheless, Saudi Arabia tried to assuage markets, promising to not flood the markets with oil.
“The $50 level was an important resistance level back in October as it stopped a rather encouraging, albeit temporary, rebound. And going further back in time, we can see a congestion zone in early 2015, which means that there was a lot of uncertainty and repositioning by bulls and bears alike. The current price zone is important in the minds of traders just as it was after the 2008 debacle,” reports Michael Kahn for Barron’s.
Saudi Arabia previously said it would join a production freeze deal if Iran agreed to curb output. However, Tehran has maintained that it should be allowed to raise production to previous levels before the introduction of Western sanctions over Iran’s nuclear program, instead arguing for individual-country production quotas.
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