CRUDE OIL OUTLOOK:
- Crude oil prices might decline if the Fed dials up hawkish rhetoric
- OPEC+ unlikely to yield to US-led requires sooner output improve
- Chart positioning hints WTI momentum flagging at 7-year excessive
Crude oil prices are buying and selling water having settled in a spread after hitting a 7-year excessive under the $86/bbl determine final week. An intraday bounce was capped yesterday as October’s US ISM manufacturing report confirmed sector development slowing whilst enter costs surge.
That echoes a slew of current financial information, together with the previous few months of payrolls information in addition to final week’s back-to-back releases of sentimental Q3 GDP information and eye-watering inflation measures. Such outcomes feed seemingly spreading worries about ‘stagflation’, beckoning the Fed to tighten credit score circumstances and funky costs.
CRUDE OIL PRICES MAY FALL ON HAWKISH FOMC STANCE
This will preview how crude would possibly react if this week’s much-anticipated FOMC coverage announcement registers on the hawkish facet of expectations. A tough baseline appears to be the formal unveiling of a plan to taper QE asset purchases from December by means of mid-2022, lowering them by about $20 billion every month.
If the central financial institution opts for a extra bold timeline or gives steering flagging a hardening stance towards inflationary extra – a sign that could be learn as opening the door to hawkish escalation – crude oil might fall. This is smart: danger urge for food is prone to bitter in such a state of affairs, whereas the US Dollar beneficial properties.
OPEC+ MAY DISAPPOINT CALLS TO BOOST OUTPUT FASTER
A gathering of the OPEC+ group of main producers on Thursday can be in view. They could decide to retain the plan of including 400ok barrels per day (bpd) to the group’s collective provide as an output cap regime is phased out, waving off strain to hurry issues up from nations together with the US.
Which will mirror technical difficulties – particularly in Africa – no less than as a lot as a want to capitalize surging costs. Bloomberg information reveals that OPEC itself – the cartel on the middle of OPEC+, which additionally consists of main suppliers like Russia – added simply 140ok bpd in output final month. That’s barely half of what it owed.
Within the meantime, API stock information is eyed. The private-sector estimate of weekly US storage flows might be weighed towards expectations of a 1.56-million-barrel improve to be reported in official EIA authorities statistics Wednesday. Headlines from the COP26 climate change summit are additionally lurking within the background.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil costs are consolidating under the $86/bbl determine, with destructive RSI divergence warning that upside momentum is fading and a flip decrease could also be within the playing cards. Overturning the near-term uptrend appears to name for a detailed under help anchored at 79.04. Which will expose 75.27.
Resistance is marked by the swing excessive at 85.41 and bolstered by the 23.6% Fibonacci extension at 86.17. Past that, the 38.2% and 50% extensions approximate upside limitations at 89.62 and 92.42.
Crude oil value chart created utilizing TradingView
CRUDE OIL TRADING RESOURCES
— Written by Ilya Spivak, Head Strategist, APAC for DailyFX
To contact Ilya, use the feedback part under or @IlyaSpivak on Twitter