Recovery is boosted by the start of production cut but needs clear break of $20 for fresh bullish signal

WTI OIL

WTI oil price regained $ 20 handle in early US trading on Friday, following over $2 pullback after hitting recovery high at $20.31 in Asia (the highest since 21 Apr).
The sentiment was boosted by today’s start of record production cut (9.7 million bps) by OPEC and its allies, agreed earlier.
Traders expect the output cut to partially stabilize oil market in reducing the imbalance between supply and demand, however, storage issue and the latest threats of another trade war between the US and China, continue to weigh on oil prices and may limit recovery.
The recovery after oil prices collapsed in April and hit negative levels at one point, is in initial phase and a lot of work at the upside is required to generate reversal signals.
Encouraging signs could be seen on weekly chart, as WTI contract is on track to end this week in green, with long tail of weekly candle, adding to positive signals.
Fresh bulls need to end week above psychological $20 barrier (reinforced by falling 20DMA) and also to break $20.47 barrier (Fibo 23.6% of Jan/Apr 2020 $65.63/$6.52 fall) to ease bearish pressure and further improve sentiment for recovery extension.
Next significant barrier lays at $26.82 (17 Apr high) and guarding pivotal points at $29.10/$30.00 (Fibo 38.2% of $65.63/$6.52 / psychological).
Improving daily techs are so far supportive, but fundamentals still play a key role and expected to remain oil’s main driver in the near future.
Caution on failure to close above $20 level that would signal extended consolidation, but near-term action is expected to remain biased higher while holding above former recovery high at $18.22..
Stronger negative signal could be expected on drop and close below 10DMA ($16.24).

Res: 20.00; 20.31; 20.87; 22.03
Sup: 18.22; 17.00; 16.24; 15.48