US Crude Oil (WTI) Analysis
- Lower oil stocks and Biden’s SPR confirmation see an increase oil prices
- Key Technical Considerations for WTI Crude Oil Ahead of OPEC+ Production Cut
- IG client sentiment reveals mixed outlook despite longs outweighing shorts 2:1
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Falling Oil Inventories, Biden’s SPR Confirmation Drive Oil Prices Higher
U.S. crude oil (WTI) reversed higher after an unexpected drop in crude inventories ahead of next month, when OPEC’s two million bpd production cuts are expected to materialize. OPEC and its allies, otherwise known as OPEC+, have taken steps to ensure price stability in the oil market as prices have steadily fallen since their peak in June. This week’s data indicates a drop of 1.725 million in crude inventories after a large addition of 9.88 million earlier, which led to a slight increase in oil prices.
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Additionally, President Joe Biden announced a plan to sell the remaining 15 million barrels of the Strategic Petroleum Reserve (SPR) while standing ready to provide new reserves early next year if prices are up. too high. Such a move should lead to lower oil prices, but it would appear that this rise was the result of short sellers buying to close existing shorts as news of additional SPR supply broke.
Biden is seeking to shore up votes ahead of the crucial U.S. midterm elections on November 8, as his presidency has become inextricably aligned with promises of lower fuel prices and, by extension, lower inflation. . The price of oil has been the main driver of inflation since Russia invaded Ukraine and has proven to only exacerbate price pressures stemming from lingering supply constraints left by the pandemic shutdowns. OPEC’s latest decision to cut production was seen as aligning with Russia, as the production cuts are expected to raise the price of crude and the general price level, putting additional pressure on US households.
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Crude Oil Technical Analysis
U.S. crude showed signs of a bullish reversal after an OPEC delegate mentioned the possible production cut of 1-2 million barrels per day (bpd), just a month after OPEC deemed necessary to cut production from October by 100,000 bpd. Crude prices bottomed around $76.50, reaching the significant $93 level that has supported prices many times this year.
price action then joined the longer-term downtrend as the bulls ran out of momentum at the $93 level, trading lower until bouncing off the descending trendline Support (past resistance) where we are today. Yesterday’s surprise drop in crude stocks sees price action near 61.8% Lying of $88.40 before the next level of resistance appears at the crucial $93 mark. Short-term support is seen at the descending trendline, followed by the 78.6% Fib at $78 – where price action recently bottomed.
US Crude Oil Daily Chart (CL1!)
Source: TradingView, prepared by Richard Snow
Long oil traders outweigh shorts by 2:1
Oil– American crude:Retail merchant data shows 66.39% of merchants are net buyers with a ratio of long to short traders at 1.98 to 1.
We usually take a view contrary to the sentiment of the crowdand the fact that traders are net buyers suggests Oil– US crude prices could continue to decline.
The number of net-long traders is 11.10% lower than yesterday and 6.50% higher than last week, while the number of net-short traders is 13.85% higher than yesterday. yesterday and 16.18% lower than last week.
Positioning is less net-long than yesterday but net-long since last week. The combination of current sentiment and recent shifts gives us a still mixed trading outlook for US oil and crude.
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— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX