China Boost Fades
Crude oil prices have sunk lower in recent sessions, reversing from the weekly highs and the latest test of the all-important 72.61 level. The reversal comes despite the EIA reporting a larger-than-forecast inventories drawdown on Wednesday of almost 5 million barrels, around 3 time deeper than the 1.3-million-barrel deficit the market was looking for. Crude prices had rallied firmly at the start of the week on news of a wave of Chinese stimulus. Rate cuts and liquidity packages aimed at boosting stocks and the property sector were seen as a strong positive for the demand outlook.
Supply Concerns
However, through the week, the focus has shifted back to supply concerns. Negotiations between rival administrations in Libya have ended in the appointing of a new central bank governor. This is seen as a key milestone in resolving the crisis which has hindered the country’s oil production this year. As such, industry trackers expect that the deal could see the return of around 0.5 million bpd to the market at a time when the market is preparing for a portion of OPEC+’s voluntary cuts to begin unwinding in December, increasing output again.
Mixed Near-Term View
The near-term outlook for oil remains hard to call for now. Upside support from a weaker USD should help offset downward pressure, along with Chinese stimulus and a backdrop of broad central bank easing. However, oversupply concerns mean crude is likely to struggle to rebound for now meaning we’re likely to see some ranging action here.
Technical Views
Crude
For now, crude prices are sitting atop the 67.45 level following the failure at 72.61. If we break below here, 63.83 will be the next support to watch. Bulls need to see a break above 72.61 to alleviate near-term bearishness and turn focus towards 77.64 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.