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Goldman Sachs: Oil Looks Extremely Attractive

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Nov. 20 2020, Updated 1:35 p.m. ET

Oil looking attractive

According to a CNBC report on November 26, analysts at Goldman Sachs (GS) think oil is extremely attractive at the current levels. Moreover, they expect the G-20 meeting scheduled between November 30 and December 1 at Buenos Aires to provide a suitable environment for OPEC and non-OPEC members to pursue a production cut. Also, the market expects the meeting to ease ongoing trade war tensions between the world’s two largest economies—a positive development for oil as a growth-driven asset.

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Energy trader Mark Fisher said he believes the next $10 move in oil prices will be on the upside during an interview with CNBC on November 19. According to Fisher, the oil market might bottom out soon. On November 14, in an interview with CNBC, Fisher said that the “worst is over” for crude oil. He also pointed out that the sharp fall in oil prices might have been triggered by money rotating from oil to the natural gas market. So, with the unwinding of this trade, oil prices might rise.

In the trailing week, US crude oil prices have lost 9.7% because of oversupply concerns. They were at their lowest-ever closing price in 2018 on November 23.

US crude oil prices and the broader market

On November 26, US crude oil January futures rose 2.4% and settled at $51.63 per barrel. The Energy Select Sector SPDR ETF (XLE) rose 1.5%. The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) rose 1.6% and 1.5%, respectively. The rise in oil prices might have supported the broader market.

In the following parts of this series, we’ll discuss key drivers for oil prices. But first, we’ll look at the top upstream stocks’ financials in the next part of this series if oil plunges below $50.

Moving averages

On November 26, US crude oil futures were 14%, 22.8%, 23.9%, and 22.8% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. US crude oil prices below these key moving averages indicate bearish sentiment for oil. However, on the upside, the closing level of $58.02 could be important for US crude oil until November 30.

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