29.12.201613:07 Forex Analysis & Reviews: Global macro overview for 29/12/2016

Global macro overview for 29/12/2016:

Crude oil inventories data is scheduled for release today at 04:00 pm GMT. Market participants are expecting a modest decline of 1500k barrels after the last week's increase of 2256k barrels. This will be the last set of oil data in 2016. The recent agreement between OPEC and other oil exporters, which calls for production cuts, is expected to come into force on January 1, 2017. According to the agreement, oil production should be cut by 1.8 million barrels per day, but it depends on the country involved. Saudi Arabia, OPEC's largest producer, has agreed to bear most of the cuts in production (486k bpd). Kuwait will decrease supplies by 130k bpd, Iraq by 209k bpd, and Russia by 300k bpd. Iran is the only OPEC member that is going to increase oil production by 90k bpd. In conclusion, market participants who speculate on further increases in the energy price may be exaggerating. Limits made by OPEC in recent years have been regularly violated by almost all members of the cartel. Besides, Russia's intention to limit supplies does not look plausible as well. Even if all of them fail to fulfill obligations, the US may pick up the slack in the market. The price above $50 per barrel restores the profitability of production from shale deposits.

Let's now take a look at the crude oil technical picture on the 4H time frame. The bulls are still in control of this market as the price is trading near its recent highs. Nevertheless, the negative divergence between the price and momentum oscillator is growing and any violation of the golden trend line will mean support at the levels of 52.40 and 51.56 will be tested again.