Crude Oil Set to Lower Further on Increased Fundamental Pressure
Crude oil made quite the reversal on Monday after falling $5 to below this year’s low after rumors that OPEC would increase production by 500 bpd at its next meeting in December. But, Saudi officials have denied these rumors and the rebound in crude oil
The 100 SMA rejected US Crude Oil yesterday
Yesterday we opened a long-term oil sell signal at the 100 SMA (green) as it offered resistance and the moving average rejected the price. Although the 20 SMA (grey) turned into support, halting the decline, so Crude Oil remains stuck between these two moving averages now.
We maintain a bearish bias on Crude Oil despite Monday’s strong rally. The latest rally to $94 was followed by a steady decline signaling that markets had digested all the news and decisions surrounding the conflict in Ukraine and that central banks have pivoted, adjusting to the new reality and shifting into a calmer mode, driven by supply and demand, rather than speculation.
Soaring inflation in the Western world, reaching a record high in the EU and the highest in forty years in Britain, while price pressures eased slightly in the United States, but still four times higher than the 2% target, prompted major central banks to start raising interest rates to fight inflation. They were giving signals of a slowdown, but equities speak otherwise, with the RBNZ raising rates by 75 basis points early this morning.
Although today’s FOMC meeting minutes may have some impact on risk sentiment, we will see when they are released. Before that though, we have the EIA crude inventories coming out, which is expected at -2.6m. But, API private inventories showed a bigger drop yesterday.
Expectations centered on:
- Global crude -1.1 min barrels
- Distillates -0.6 min bbls
- Fuel +0.4 mins