Gulf Economies Must Fortify Against External Shocks as Geopolitical Tensions Gather Force

"For however the fortune of war shall go, may it not so end that much that was fair and wonderful shall pass for ever?" King Theoden in The Lord of the Rings laments the end of the Ents, magical tree-herders.

Even if we tackle climate change successfully, some beauty and marvels of the nature and human worlds will be lost to us. Our children and grandchildren may never know polar bears, unspoilt coral reefs, the Piazza San Marco in Venice, a verdant Amazon rainforest, or the Anse Source d'Argent beach in the Seychelles. If we are from parched, semi-arid, or low-lying coastal countries, our children and grandchildren may not know our land at all – they may be fated to be refugees from climatic catastrophes and conflict.

But this is not another despair-inducing screed about climate doom. The climate summit Cop28 opens in Dubai on Thursday. And like Cop, this article is about where we are now, where we will soon be, and what to do about it.

This year is set to be the hottest on record. October was 1.7 degrees hotter than pre-industrial levels. The El Nino effect in the eastern Pacific, after an unusually extended period of its colder opposite La Nina, brings hotter global weather in general.

Cleaning up pollution from sulphur-containing fuels in ships, following regulation in 2020, is good for human health, but the white "aerosol" particles had a helpful side-effect in reflecting some of the sun's heat back into space. The reduction in sulphate pollution has warmed the busy shipping lanes of the North Atlantic in particular.

And in January 2022, the submarine volcano Hunga Tonga-Hunga Ha'apai erupted. Tropical eruptions can sometimes release huge amounts of sulphate particles, with a similar cooling effect to that of the shipping pollution. But Hunga instead injected huge volumes of water into the stratosphere, and water vapour is itself a strong greenhouse gas.

As El Nino's full effects take time, next year is likely to be hotter still. But the biggest culprit is not cyclical variations, volcanic eruptions or cleaner ships, but the ever-increasing volume of greenhouse gases we are adding to the atmosphere. The Paris Agreement of 2015 was intended to limit warming to no more than 1.5°C above pre-industrial levels by 2100. A single hot year does not invalidate that aim, but on current trends, it will be breached regularly by the 2030s.

If all countries meet the goals they set themselves in their Paris-related commitments, global emissions will remain roughly flat by 2030 at around 55 billion tonnes of carbon dioxide and other greenhouse gases per year. That would still be a major achievement – in 2010, it looked as though we were heading for 65 billion tonnes or more.

Yet, to be on target to limit warming to 2°C – the original Paris goal, and still dangerously hot – emissions could be about 41 billion tonnes. For the 1.5°C goal, emissions should be no more than about 33 billion tonnes.

This leads to four important conclusions.

The recognition at Paris of the need to reach net-zero carbon – not just lower emissions – was crucial. Carbon dioxide lingers in the atmosphere for thousands of years. So, the climate will keep getting hotter as long as carbon dioxide emissions continue faster than they can be removed.

Reaching net zero at some date – whether 2050, like the target of the UAE, UK and US, the 2060 of Saudi Arabia and China, or India's 2070 – is good but not enough. The amount of global warming depends on cumulative emissions, not on the precise date of net zero. It's far better to get on a path to rapid reductions now, than to imagine we can leave all the hard work to the 2040s, like a student pulling an all-nighter on a final essay.

Second, it's increasingly unlikely that, whatever our efforts and the successful agreements at Cop28, we will stay below 1.5°C of warming. That isn't a counsel of despair – it's a vital recognition of reality that clears the mind for what to do next.

Third, every fraction of a degree matters. We can't precisely ascribe tenths of a degree to differences in emissions, but we do know that 1.6°C is better than 1.7°C, which is better than 1.8°C.

Fourth, we have no more opportunity for half-measures, for ideological fetters. We have to be absolutely clear about the task at hand. The goal of climate policy is not to overthrow global capitalism, punish the greedy carbon-spewing rich, end the use of fossil fuels, revive the Western working class, introduce a more just social order, right historic injustices, or rebalance geopolitics.

It is to cut net emissions as fast as possible and cope with the inevitable damaging consequences of a hotter world. Of course, we should seize positive social, environmental and economic opportunities where they arise, and at least not make things worse.

As wartime leader Winston Churchill said, "It is not enough that we do our best; sometimes we must do what is required."

Cop28 will call for a tripling of renewable energy capacity – which we're probably close to on-track for – and a doubling of energy efficiency, which we are not. The era of burning fossil fuels and spewing the exhaust into the atmosphere has to end very soon. But that favourite environmental approach is not the wrong answer, but an incomplete one.

The odd hostility in the environmental and much of the journalistic community towards nuclear power and carbon capture needs to reverse – every serious scientific climate scenario has them also playing important parts in Plan A. Plan B includes quicker, cleaner and cheaper ways to remove atmospheric carbon dioxide – not as an alternative to urgent emissions cuts today, but as an essential complement.

And given the increasingly obvious and damaging effects of even 1.5°C of warming, we need Plan C too – cleaner, controlled ways to replicate the cooling effect of those polluting ships and sulphur-bearing volcanoes. Those who dismiss this as dangerous geo-engineering should acknowledge we've been running a much larger, unplanned experiment on the Earth's climate since James Watt's steam engine in 1765.

We need to advance Plans B and C, not because we've given up on Plan A, but because we take every tonne of carbon and every tenth of a degree of warming with the ultimate seriousness. That is because every tree, every rare creature, every great monument of human culture and every child saved from the ravages of a burning, melting planet is one less tragedy.

The OPEC meeting was scheduled for November 26th but has been postponed to this Thursday. This suggests deepening alliance disagreements over whether to curtail production, according to investors. Saudi Arabia, which wants to keep prices from falling, will likely reach a deal. However, even if that is the true and OPEC+ provides a plan to tighten supply over the coming months, Saudi Arabia will probably not get as much reduction as it wanted. Any additional cuts beyond those announced on Thursday are likely off the agenda.

Technically, WTI crude oil futures confirmed a bearish bias in the short-term after the rejection of jumping above the negative cross within the 20- and the 200-day simple moving averages (SMAs). More losses could drive the market towards the 72.30 support before meeting the lower boundary of the descending channel near 68.20. However, any jumps above the 200-day SMA could send the price towards the 80.00 round number.

The upcoming focal point will be the US dataset scheduled on Thursday, encompassing personal income and expenditure, alongside the core PCE price index. It is anticipated that both personal income and consumption experienced moderation in October. The core PCE inflation measure, which holds significant importance, is expected to have decelerated from 3.7% to 3.5% y/y in the month of October.

In FX markets, USD/JPY has been stubbornly pushing for some recovery without success lately. The pair is still developing beneath the near-term SMAs, holding near the 149.00 area. In case of more declines, they could open the way for a test of the 147.10 and 145.80 barriers. Only a fall beneath the 200-day SMA at 141.85 could endorse the negative structure. On the other hand, a jump above the 13-month high of 151.90 could brighten the bullish outlook again.

The preliminary measurements of inflation for November for the Eurozone will also be released on Thursday. It is anticipated that the Harmonized Index of Consumer Prices (HICP) will drop from 2.9% to 2.8% in November, marking the lowest level in almost two years. It is anticipated that the core measure, which excludes all volatile items, will come in at 4.0%, down from 4.2% in October.

EUR/USD is failing to surpass the more-than-three-month high of 1.0965. A climb above this region could a be a big achievement in the short-term timeframe, sending prices to the 1.1065 and 1.1150 resistance levels. Alternatively, a drop lower could challenge the 1.0850 support before resting near the 200-day SMA at 1.0810.

Whether the ongoing ceasefire between Israel and Hamas can be extended beyond the agreed period will depend on the level of trust on both sides, experts told CNA on Monday (Nov 27).

The truce entered its fourth and final day on Monday, with a series of hostage-prisoner swaps taking place in the first three days.

"Hope? Definitely. Confidence? I'll be more cautious," said Dr. Jean-Loup Samaan, senior research fellow at the National University of Singapore's Middle East Institute of the possible extension.

On Sunday, Hamas freed 17 hostages held in Gaza, including a four-year-old American girl, who were part of a larger group captured when Hamas fighters attacked Israel on Oct 7. In return, Israel freed 39 Palestinians, all of whom are teenagers, according to local media.

Hamas said it wanted to extend the truce if serious efforts were made to increase the number of Palestinian detainees released by Israel, while United States President Joe Biden also said he hoped the pause in fighting can go on as long as hostages are getting released.

"From the beginning of the truce, the idea was that this would be a day-by-day process that it is about building trust on both sides, that this exchange of hostages and prisoners can work," Dr. Samaan told CNA938.

He noted, however, that the Israeli government is still indicating that it is ready to continue with military operations in Gaza.

"I assume that even if it is extended, that will be just for a few more days. We won't have at this stage, any scenarios such as to have a permanent ceasefire," said Dr. Samaan.

While there have been some disagreements over the selection of hostages to be released on both sides, they are just "minor details", he said, adding that the arrangement has gone well overall.

There has not been a major breach of the terms of the ceasefire in the past few days, giving hope for a potential extension, said Dr. Samaan.

Dr. Anas Iqtait, lecturer of economics and political economy of the Middle East at the Australian National University, told CNA's Asia First on Monday that the pause in fighting will give Hamas a chance to regroup.

The Gaza Strip has seen an extensive level of damage, and the truce would allow Hamas to reorganise itself.

"It's important to mention that the Gaza Strip's governance system is run by Hamas, and this includes things such as healthcare, education – which has been suspended since the beginning of the war – and other municipal services and the like," he noted.

From a governance and humanitarian point of view, the truce has brought some much needed respite for the Palestinians amid the extensive bombardment, which has destroyed a vast majority of infrastructure and displaced much of the population in the north of Gaza.

Meanwhile, the total number of Palestinian prisoners in Israel is unconfirmed, said Dr. Iqtait.

More than 2,000 people have been imprisoned across the West Bank since Oct 7, when Hamas launched a surprise attack on Israel, Palestinian Prisoners' Club director Qadura Fares had told the Associated Press.

Dr. Iqtait explained that the vast majority of Palestinian prisoners are tried in Israeli military courts, including the chilDr.en, and they are held under different pretexts, including stone-throwing, illegal demonstrations, protesting and resisting arrest.

"The context is extremely important here. The West Bank and the Gaza Strip obviously are under Israeli military occupation, and (for) the Palestinians (the) rules they live under are the Israeli military rules, including their imprisonment," he said.

He noted that Israeli military courts have a high conviction rate of more than 97 per cent, and when faced with accusations, those accused are being prevented from properly defending themselves and do not go through a fair court system.

The foreign hostages caught up in the mix also add another layer of complexity to the war, said Dr. Iqtait.

Qatari officials believe that 40 of its nationals – all women and chilDr.en – are being held in Gaza by gangs. They are among the civilians who have been captured by militant groups that do not belong to Hamas.

"So one of the objectives of the ceasefire was for Hamas to be able to identify and count and locate the total number of Israelis who have been held captive and who are being held captive inside of the Gaza Strip," said Dr. Iqtait.

"The fact that Hamas doesn't really have a complete picture of how many Israelis are inside of the Gaza Strip, makes it that more complicated for the continuation of the ceasefire, and also for a peaceful resolution for the release of these captives."

Dr. Samaan noted that hostage release is a tactic being employed by Hamas, and is a "continuation of the war by other means".

The group will try as much as possible to extend the ceasefire by slowing down the release of hostages, including withholding the U.S. hostages and Israeli military officers it had captured, he added.

"This is also one of the reasons why eventually, this could unravel and we could see a return to the military operations," he said.

If Hamas sees that the military operation will ultimately continue, it will probably keep the hostages and possibly use them as human shields from Israeli strikes, said Dr. Samaan.

He noted the significance of the U.S. involvement in the deal. The U.S., along with Egypt and Qatar, had played a decisive role in facilitating the arrangement between Hamas and Israel.

The U.S. government is directly involved as there are a number of U.S. citizens among the hostages held by Hamas, said Dr. Samaan.

"In addition to that, there is a clear hope on the U.S. side from the Biden administration that what we see with this truce is the possible de-escalation (of the conflict)," he said.

"There's a desire very clearly from the White House to reduce the level of the military operations that we've seen over the last week."

Yen is having a moderate rebound today, spurred by slightly stronger-than-expected corporate services price inflation data. However, this uptick in is showing only restrained momentum, especially noticeable even against a weaker Dollar. The limited rise can be attributed to low market activity, as there are no significant events scheduled for the day.

Nevertheless, this tranquility in the market is expected to be short-lived, as volatility is likely to escalate with the unfolding of high-profile events later in the week. Key events include inflation data releases from US, Eurozone, and Australia, along with RBNZ rate decision.

Technically, Gold finally breaks through 2009.26 resistance and resume near term rally to a six-month high in Asian session. Technically, further rally is expected as long as 1986.67 support holds. Next short-term target is 61.8% projection of 1810.26 to 2009.26 from 1931.39 at 2054.37. It remains to be seen if Gold is strong enough to break through 2074.48 long term resistance.

In Asia, Nikkei dropped -0.53%. Hong Kong HSI is down -0.16% China Shanghai SSE is down -0.30%. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield closed flat at 0.778.

In today's address to the parliament, BoJ Governor Kazuo Ueda provided note that the economy is "recovering moderately," which is further evidenced by the narrowing of the output gap to "near zero".

Ueda also highlighted "We're seeing some positive signs in wages and inflation". However, he tempered this optimism by acknowledging the "high uncertainty on whether this cycle will strengthen"

A key point in Ueda's commentary was BoJ's stance on inflation. Despite the positive signs, he stated that the central bank cannot yet assert with confidence that inflation will sustainably and stably achieve its 2% target.

In the current oil market, stability reigns as prices stay in the near-term range, with all eyes on the impending delayed OPEC+ meeting scheduled for Thursday. There's growing consensus, as per news reports in the past two days, that a compromise on 2024 output levels is within reach. However, it seems the most probable outcome will just be continuation of existing production cuts, rather than any new, drastic changes.

This outlook, predominantly unaltered barring any unexpected deepening of cuts, steers towards bearish sentiment for oil prices in the near term. A key factor influencing this view is rising inventory levels in US. Concurrently, economic growth in China, a major player in global oil demand, remains tepid. While there have been some positive signs in China, they are not robust enough to shift the demand dynamics significantly.

Another critical element in this equation is Saudi Arabia's decision regarding its additional voluntary cut of 1 million barrels per day, which is nearing its expiry at the end of December.

From a technical standpoint, near term outlook in WTI crude oil stays bearish with 79.98 resistance holds. Current fall from 95.50 if expected to extend through 72.56 to 63.37/66.94 support zone. But strong support would likely be seen to to bring rebound. Overall, range trading should continue for the medium term above 63.67, barring another significant developments.

RBNZ is widely expected to hold the Official Cash Rate steady at 5.50% on Wednesday. Accompanying this decision will be the quarterly Monetary Policy Statement, which will include new economic forecasts. Despite some speculation about potential rate cuts in 2024, RBNZ's projections may not strongly reflect this, especially considering the recent resurgence in energy prices. This could imply that the RBNZ may either need to hike rates further or maintain the current levels for an extended period, with the latter seeming more likely. In terms of central bank activities, Fed is also set to release its Beige Book economic report, offering insights into the economic conditions across various regions.

On the data front, key inflation figures are due from several major economies. US will release its PCE and core PCE price indexes, while Eurozone will publish its CPI flash data. Australia's monthly CPI data is also awaited. These inflation reports are crucial for central banks like Fed and ECB, as they could influence the timing and pace of upcoming rate cuts and pace of policy loosening next year. Although Australia's more critical quarterly CPI data will come in January, the upcoming monthly figures will still play a role in shaping market expectations regarding RBA's next moves.

Canada's employment data is another significant release that could impact the forex markets. Particularly, following a strong market response to Canada's recent robust retail sales data, another set of positive employment figures could potentially trigger a notably rally in Loonie.

Lastly, economic indicators from China, including the official and Caixin PMI reports, will be closely watched. These reports are vital in supporting the recent rally in commodity prices, as they provide insights into the Chinese economy's health, a major player in global commodity demand.

USD/JPY dips notably today but stays above 148.57 minor support. Intraday bias remains neutral at this point. Risk stays on the downside as long as 55 4H EMA (now at 149.55) holds. Break of 148.57 minor support will turn bias to the downside the resume the fall from 151.89 through 147.14 support. However sustained break of 55 4H EMA will revive near term bullishness, and target a retest on 151.89/93 resistance zone.

In the bigger picture, rise from 127.20 (2023 low) is seen as the second leg of the pattern from 151.93 (2022 high). Decisive break of 145.06 resistance turned support will confirm that this second leg has completed, after rejection by 151.93. Deeper fall would be seen through 38.2% retracement of 127.20 to 151.89 at 142.45 to 61.8% retracement at 136.63. Nevertheless strong bounce from 145.06 will retain medium term bullishness for another test on 151.93 at a later stage.

The DXY dollar index is down around 3.5% from its highs seen in October. The drop looks largely down to the view that the Federal Reserve's tightening cycle is over and that portfolio capital can now be put back to work in bonds, equities, and emerging markets. While acknowledging that November and December are seasonally soft months for the dollar, our view is that this dollar sell-off has come a little early. We are bearish on the dollar through 2024 but expect the core driver to be a bullish steepening of the US Treasury curve – which has not happened yet. Indeed, US two-year Treasury yields remain firm near 5%. We thus urge caution in chasing this dollar decline much further.

In terms of what this week has to offer, we pick out three themes: the Fed, OPEC+ and US data. Fed communication this week will come from the release of the Fed's Beige book and also some key speakers, including Fed Chair Jay Powell, on Friday. Remember that the Beige Book paints a picture of the economy to prepare the FOMC for its meeting on 13 December. It certainly is not clear that the Beige Book will paint a soft enough picture to support the 80bp of fed easing already priced for next year.

In terms of the OPEC+ meeting, our commodities team believe that the Saudis will extend their voluntary supply cut and that the oil market can find some support - a mild dollar positive. In terms of US data, the highlight should be some stable (0.2% MoM) core PCE inflation data for October and the ISM Manufacturing data on Friday. Thursday's US inflation data is probably the largest bearish risk to the dollar this week.

However, with cross-market volatility falling, it seems investors are once again interested in carry trade strategies. We have seen this theme several times this year already, and it is not a dollar negative. It is a negative for the funding currencies like the Japanese yen and the Chinese renminbi. Until we get some clear dovish communication from the Fed or US data is materially weak enough, we think this dollar drop might have come far enough for the time being and suspect that the 103.00/103.50 support area could well hold the DXY this week.

EUR/USD remains well bid, but should struggle to better resistance at 1.0965/1000 this week. As mentioned above, we think the dollar sell-off may not have legs since the short end of the US rates curve is still pretty firm. From the eurozone side, this week's data highlight will be flash CPI for November set to be released on Thursday. Here, further disinflation is expected in both headline and core readings, bringing year-on-year rates back to 2.7% and 3.9%, respectively. These readings might tend to support the 70bp of the European Central Bank (ECB) easing priced into eurozone money markets next year.

Additionally, expect investors to keep one eye on fiscal developments in Germany. It is unclear from where a political solution will emerge and will do little to discourage views of a stagnant eurozone economy in early 2024. Overall, we favour EUR/USD correcting to the 1.0825/50 area this week.

Sterling has been performing a little better of late, no doubt buoyed by the better global risk environment. We do also think that the fiscal story has helped, where the UK government plans to put £20bn to work in the economy, while countries like Germany remain hamstrung by its constitutional court. At the same time, the slightly better November PMI readings have supported sterling too. These developments have left investors looking for just 40-50bp of Bank of England (BoE) easing next year – clearly less than what is expected of the Fed or of the ECB.

The UK data calendar is light this week, but we do have several BoE speakers. Governor Andrew Bailey already seems to be playing around with language on forward guidance, where restrictive monetary policy will be retained for an 'extended period' or, most recently, 'for quite some time'. All in all, we feel that EUR/GBP could correct a little further and a close under 0.8660 could unlock 0.8630 or even 0.8600 this week.

The first half of the week basically has nothing to offer in the region. We will see the first interesting data on Thursday. In Poland, November inflation will be published, where we expect a slight increase from 6.6% to 6.7% YoY, slightly above market expectations. Poland's second estimate of third-quarter GDP will also be released, which will offer a breakdown. We expect a confirmation at 0.4% YoY. On Friday, we will see the same GDP numbers in Hungary and the Czech Republic and also PMI in the region. The Czech Republic will also release budget numbers, and Moody's will publish a rating review of Poland. We don't expect any changes, but it will be interesting to see the assessment of the political and fiscal situation after the elections.

The zloty did not move much last week despite confirmation of an economic recovery. However, the short end of the rate curve is gradually moving up as we expected, which we think should push EUR/PLN down. Of course, the long positioning of the market is good to keep in mind here and will likely be an issue for faster PLN appreciation. These days, we see EUR/PLN below 4.360.

The koruna strengthened last week after a surprise paying flow and maybe some hints of hawkishness from the Czech National Bank (CNB). However, we believe that weak economic data and more mixed CNB views will bring back the rate-cutting discussion and that market rates will go down again. The first signal was already visible on Friday, and rates are thus pointing to a weaker koruna back above 24.450 EUR/CZK.

The forint rebounded last week after the National Bank of Hungary (NBH) meeting but still failed to hold new gains. We think EUR/HUF should go down from these levels, but we need to see new triggers. Last week, we saw positive headlines from the EU money story – and we may see more this week, which would certainly help. Rates also bounced up after the central bank meeting. Overall, we are positive on the HUF and expect levels below 380 EUR/HUF in the coming days.

Last week ended on a positive note where the US equities advanced to fresh highs since summer on a holiday shortened trading week. The S&P500 gained for the 4th consecutive week and closed the week near 4560, the rate-sensitive and technology heavy Nasdaq 100 extended gains beyond the summer peak, and hit an almost 2-year high, while the VIX index, which is known as Wall Street's fear gauge, or the volatility index, slumped to the lowest levels since January 2020. The belief that the Federal Reserve (Fed) is done hiking the interest rates, and the rapidly falling US long-term yields are at the source of this optimism – especially after the latest CPI update in the US printed a softer-than-expected number, suggesting that inflation in the US fell to 3.2% last month. This week, investors will find out if the Fed's favourite inflation gauge, the PCE index, tells the same story. The PCE index is expected to have fallen from 3.4% to 3.1% in October, and core PCE may have eased from 3.7% to 3.5% during the same month. Anything less than soothing could lead to some more correction in the US long-term yields. The 10-year yield jumped to 4.50% early Monday, though the positive pressure slowed above 4.50%.

News that the Black Friday spending jumped 7.5% this year to hit a record high of $9.8 billion certainly reminds investors that consumer spending in the US remains strong. The latter gives a strong support to the US economy, which in return gives a solid confidence to the Fed that keeping the rates high for long is not necessarily a bad idea. Today, the sales continue with Cyber Monday deals.

Yet the holiday shoppers' enthusiasm is less visible on the financial markets this Monday. The US futures are down, along with their Asian peers on the back of a rebound in US yields, the nearly 8% slump in Chinese industrial profits in October and news that children in China are suffering from respiratory infections – which spurs speculation that it could be a new strain of Covid. Chinese authorities say that it's simply a mix of known respiratory diseases. But you know, once bitten, twice shy.The Dollar Index extends losses below 200-DMA

Friday's rebound in the US yields couldn't give a bullish shift to the US dollar. The dollar index slipped below its 200-DMA, closed the week below this level and is under renewed selling pressure this morning despite positive pressure on the yields. The broad-based dollar weakness helps the EURUSD extend gains to 1.0950, with solid resistance seen into the 1.10 level given weaker growth perspectives for the European economies compared to the US in the coming months. Cable trades past the 1.26 level, while the USDJPY remains offered near the 50-DMA, near the 149 level. The yen is benefiting from rumours that a growing number of institutional players are turning long yen on expectation that the Bank of Japan (BoJ) will one day normalize its rate policy. Every day that goes by brings the BoJ closer to normalization and there is a great upside potential for the yen at the current levels – hence a great downside potential for the USDJPY. Yet the right time for getting long yen is anybody's guess. What we know however is that the upside potential in the USDJPY is certainly limited above the 150 level.

In commodities, gold pulled out offers at the $2000 per ounce and is trading above this level this morning. The softer dollar gives support to the yellow metal, yet the rebound in the US long-term yields, news of a potential extension of cease fire in Gaza beyond today and the fact that the precious metal is worth just shy of its ATH levels hint at a limited upside potential at the current levels.

In energy, appetite in oil is nowhere to be found this morning. The barrel of US crude trades below the $75pb level despite news that OPEC+ is nearing a resolution of the disagreement on output quotas, which led to the group delaying a crucial meeting last weekend. Officials said that discussions with the African nations over the production quotas continue and agreement is within reach – in which case Saudi will likely announce at least 1mbpd extra supply cut to prevent oil bulls from leaving the battlefield. But oil traders need more effort to reverse the selloff in oil prices. The barrel of US crude sees strong resistance around the 200-DMA, near the $78pb level, and the price should rally past the $81pb level for the current bearish trend to reverse.