BRENT CRUDE OIL (LCOc1) TALKING POINTS
- Demand-side factors continue to dominate.
- Will OPEC trim supply again?
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BRENT CRUDE OIL FUNDAMENTAL BACKDROP
Brent crude oil rallied yesterday on the back of a weaker U.S. dollar coupled with a notable decrease in U.S. crude oil stockpiles as revealed in the EIA weekly report. This morning has seen a resumption of the downward trend as the dollar is bid once more, making yesterday’s move largely attributed to oversold levels as well as quarter-end rebalancing. Markets are still focused on demand destruction and a global recession as opposed to supply-side concerns.
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From a supply point of view we next weeks OPEC meeting on October 5th will be watched with keen eyes as OPEC may announce a second supply cut which is expected to be far more substantial than the prior announcement to stabilize crude oil prices. In addition, some OPEC+ producers are continuing to export far less than their agreed upon quotas with reports from delegates reporting an average daily shortfall of 3.58 million barrels per day.
U.S. GDP is the only high impact event scheduled today and forecasts expect an improvement over the prior print. Anything better than -0.6% could lead to a stringer dollar thus weighing on brent crude.
ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
BRENT CRUDE (LCOc1) DAILY CHART -UNDATED
Chart prepared by Warren Venketas, IG
Price action on the daily brent crude chart has the 20-day EMA (purple) forming a formidable short-term resistance zone which does leave further upside on the table. We are likely to see bears jump back in around this zone and look for the psychological 85.00 handle once more. If we find a confirmation daily close above the 20-day EMA then this short-term outlook will be invalidated exposing the 90.00 inflection point.
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Key resistance levels:
Key support levels:
IG CLIENT SENTIMENT: BULLISH
IGCS shows retail traders are NET LONG on crude oil, with 65% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we settle on a short-term upside bias.
Contact and followWarrenon Twitter:@WVenketas
