Oil markets experienced a change of fortune during the third quarter of 2017, as investors became increasingly optimistic about the effectiveness of OPEC’s production cut deal.

The oversupply concerns were swept under the carpet, as repeatedly positive comments from OPEC fuelled expectations that the cartel would eventually rebalance markets.

Can OPEC revive Oil bulls in Q4?

With US stock piles steadily declining for the most part of Q3, investor attraction towards the commodity received a boost, as the oversupply fears somewhat eased.

WTI Crude concluded the quarter higher with prices hitting a five month high above $52.00.

As we enter the final quarter of 2017, oil prices could turn sensitive, as investors ponder over what “extraordinary measures” OPEC may implement, to rebalance oil markets in the medium to longer term.

OPEC production hit the second highest monthly level in September this year, at 32.75 million barrels per day and US Shale production soared nearly 10% in 2017.

This means that Oil could find itself under renewed selling pressure.

OPEC Secretary General Mohammed Barkindo has already called for US Shale oil producers to help reduce the global supply glut, but with US Shale in a comfortable position, the jury is still out on whether his pleas will fall on deaf ears.

Although Saudi Aramco plans to make “the deepest customer allocation cuts in its history” by cutting 560,000 bpd in November, its impact may be heavily diluted if US Shale continues to ramp up production.

OPEC vs Nigeria, Libya and Iraq

Markets will continue to observe what OPEC does about Nigeria, Libya and Iraq, who all saw their biggest increase in production last month.

Nigeria and Libya, both exempt from the production cuts, led gains with monthly increases of about 50,000 bpd in September.

Although OPEC has given these two nations free reign to pump production, because internal conflicts created big production declines in both countries, the question is for how long?

The threat of increased production from Nigeria, Libya and Iraq, sabotaging efforts made by the rest of the group to rebalance markets, may pressure OPEC to request production cuts from all three nations.

Technical Point on Oil Market

Investors will continue to closely scrutinise markets in Q4, for any fresh details on the “extraordinary measures” and signs of OPEC extending its production cuts beyond March 2018.

From a technical standpoint, WTI Crude remains under pressure on the monthly charts below $55, despite the appreciation witnessed in Q3.

There have been consistently lower lows and lower highs on the monthly timeframe, while, on the weekly charts, prices are trapped in a wide range.

The major resistance level remains $55, while support can be found at $42. Daily technical traders may be encouraged to send the commodity lower, once the $50 level is breached again.

Sustained weakness below $50 is likely to encourage a further decline towards $47 and $44.

In an alternative scenario a decisive breakout above $55 on the monthly chart, may signal the end of a bearish trend with the next key level at $60.

For prices to break above $55, it may take some “extraordinary measures” from OPEC to stabilize the saturated markets.