Crude oil price set to target January low failing to defend monthly low

Crude Oil Price Talking Points

Oil price holds above weekly low ($81.73) after showing limited reaction to weaker-than-expected rise in US inventories, but failure to defend monthly range could push crude lower January low ($74.27) as it seems to follow the negative slope in the 50-day SMA ($91.27).

Crude oil price set to target January low failing to defend monthly low

The price of oil appears to have reversed course ahead of the moving average as it struggles to hold the rebound from the monthly low ($81.20), and it remains to be seen whether the Organization of the Petroleum Exporting Countries (OPEC) will react. to the fall in crude oil. price as the group returns to its previous production schedule.

Data printouts from the United States could encourage OPEC not to increase production further as oil inventories rise for the third week in a row, with inventories rising by 1.142 million in the week ending September 16 against forecast increases of 2.161 million.

This development could reinforce OPEC’s expectations of robust demand, as the latest Monthly Oil Market Report (MOMR) indicates that “in 2023, expectations of healthy global economic growth, combined with projected improvements in the COVID-19 containment in China, should boost oil consumption,” and the group may adopt a wait-and-see approach at the upcoming ministerial meeting on October 5, as rising interest rates in advanced economies cloud the outlook. of global growth.

Until then, the price of oil could face some headwinds if it fails to defend the monthly low ($81.20), but current market conditions could limit crude’s downside risk as the U.S. production remains below pre-pandemic levels.

A closer look at figures from the Energy Information Administration (EIA) shows a weekly print of production in the field at 12,100,000 for the four weeks, and expectations of strong demand as well as indications of supply. limited can serve as a safety net for crude as OPEC returns to its prior production schedule.

That said, the price of oil could consolidate ahead of the next OPEC meeting as it appears unperturbed by data printouts from the US, but the failure to defend the monthly range could push crude down to the January low ($74.27) as it appears to be following the negative slope of the 50-day SMA ($91.27).

Daily crude oil price chart

Source: Commercial view

  • Oil price appears to have reversed course ahead of the 50-day SMA ($91.27) as it retraces below the $84.20 region (78.6% expansion) at $84.60 ( 78.6% expansion), with a move below the monthly low ($81.20) opening the Fibonacci crossover around $78.50 (61.8% expansion) to $79.80 (61 .8%).
  • The next area of ​​interest is around $76.50 (50% retracement) to $76.90 (50% retracement) followed by the $73.20 region (38.2% expansion) at 74 $.40 (50% expansion), which lines up with the January low ($74.27).
  • Still, the price of oil may face range-bound conditions if it continues to hold above the monthly low ($81.20), but it needs a close above the region. from $84.20 (78.6% expansion) to $84.60 (78.6% expansion) to bring the $88.10 (23.6%) region. % expansion) return area on the radar.

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— Written by David Song, Currency Strategist

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