Oil market prospects and Eland Oil & Gas analysis

Financial markets analyst Rajan Dhall picks out the day's key industry news and runs the numbers to see what this share price might do next.

Oil markets are waiting in anticipation to find out if OPEC+ will agree on a production cut similar to the levels seen in 2016. Rumour is that cuts will be in the region of 800,000 to 1.5 million barrels per day, with Russia and Saudi Arabia taking the lion's share of the responsibility. 

As with any OPEC meeting, this one is shrouded in drama. There have been reports that Russia has been asked to cut a massive 250,000 barrels from its production numbers. Russian energy minister Alexander Novak said today that cutting production during winter is very difficult due to high demand. Saudi Energy minister Al Falih says a total 1 million barrel cut should be adequate. 

Looking at some of the price action today, it seems that oil traders are expecting OPEC to underwhelm as we have broken through key intraday support levels. 

As you can see from the hourly chart below, we are heading toward the gap which appeared at the weekend open of WTI futures. Also, the $51.18 dollars per barrel area - where most contracts have been traded in the visible chart area (also known as the value area) - is close by. 

These two areas combined could provide some support but, if we do hear that the cuts are towards the lower end of projections, the crude price could break supports.

Source: TradingView (*) Past performance is not a guide to future performance

Eland Oil & Gas 

This morning we had an update from AIM-listed Eland Oil & Gas. Through its joint venture company Elcrest Exploration and Production Nigeria Ltd (Elcrest), the firm bought an interest in the OML 40 licence in the Niger Delta in 2012. In 2014, Eland acquired a stake in a second licence, Ubima.

The company said that the E1000/E2000 reservoirs in the Ubima-1 well have been tested at 900-1,000 barrels of oil per day (bopd). Eland chief executive George Maxwell said:

"We are delighted with the initial test results at the Ubima-1 well and the flows from the E1000/E2000 reservoirs".

This isn't the only piece of good news the company has had from the area. Previous tests achieved 2,500bopd from the F7000 reservoir.

Eland will now look to undertake an extended well-test (EWT), monetised through third party infrastructure, in early 2019. This is a great result but data from the EWT will be important. 

Chart analysis

The weekly chart shows a clear and strong uptrend, although we have pulled back from best levels. 

Eland's share price is now stuck in a consolidation area between 94p and 115p. A break either way will be significant as it could give us an indication as to whether the shares are capable of hitting the 139p high again. 

Buying volume seems to be backing the move higher, although there was a big selling spike on 26 October. If the 115p level breaks with good volume backing the move, it would be a bullish signal. 

*Horizontal lines on charts represent levels of previous technical support and resistance.