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Crude Continuing Higher
Crude prices today broke out to their highest level since November 2022 as the rally off the YTD lows continues to gather pace. Crude futures are now up more than 30% off the lows printed in May and look poised for further gains while above the 82.59 level. Oil prices have been on a steady run higher over recent weeks driven by the latest production cuts announced by OPEC+. Saudi Arabia and Russia announced the removal of almost 2% of global daily oil supply along with signalling the readiness to cut further if needed.
Shifting USD Outlook
The subsequent lift in oil prices also coincided with shifting Fed expectations. With the market now no longer pricing in a further Fed hike this year and instead looking and to expected rate cuts early next year, the USD outlook has shifted lower. While we’ve seen some rebound in USD in recent weeks, this hasn’t dented upside in oil prices with the market seemingly still expecting USD to move lower in coming months, supporting demand for oil. Additionally, with the Fed now no longer forecasting a recession in the US this year, near-term demand expectations have improved.
Large EIA Inventories Surplus Reported
Indeed, the rally continues in crude despite yesterday’s EIA data coming in well above forecasts. The EIA reported an unexpectedly large 5.9-million-barrel inventories surplus, well above the 2.1-million-barrel surplus forecast. This was a stark shift from the prior week’s record 17-million-barrel deficit and reflects a volatile demand environment in the US currently.
Technical Views
Crude
The rally in crude prices has seen the market breaking out above the bear channel highs and now also the 82.59 level. This is a major resistance level for the market, having previously marked the highs for the year. With momentum studies bullish, the outlook remains in favour of higher prices while above here, targeting 93.47 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.