Oil eases below $80, bull trend remains

Oil slips below $80 on slowing growth concerns, bullish trend remains intact for now.

Oil bulls pause for breath

 

Oil has surged over 7% so far this month, building on gains of almost 10% last month. WTI has rallied over 4% over the past 4 sessions hitting a 7 year high of 82.18 earlier this week. However, after 4 consecutive sessions of gains oil bulls are taking a breather and WTI has slipped below $80.

What factors are supporting oil prices?

Oil prices have been driving higher as demand outstrips supply. As economies reopen and economic activity picks up, oil demand has risen. Boosting demand further is the ongoing energy crisis.

Gas prices and coal prices continue to rise, trading at around all time highs. Oil looks comparatively cheap and is now an attractive alternative for fuel generation.

Meanwhile on the supply side, OPEC agreed to stick to the previous plan of raising output by 400k bpd rather than ramping up production further.

Why are oil prices easing today?

Concerns over global growth are taking the edge of the bullish oil trade today. Concerns are rising that oil demand growth will slow as economies suffer from elevated inflation and supply chain issues.

Yesterday the IMF trimmed its global growth forecast from 6% to 5.9% for this year, citing inflationary concerns and supply chain problems as holding back the economic recovery from the pandemic.

US CPI is due to be released shortly and is expected to print at 5.3% in September, unchanged from August, whilst core CPI is expected at 4% also unchanged. The FOMC minutes are expected to reflect the hawkish bias from the policy announcement itself.

Higher than forecast inflation could further fuel concerns over demand growth being hit. Meanwhile signs that the Fed are moving towards tightening monetary policy could also unnerve oil bulls, whilst pushing the US Dollar higher.

Looking ahead

In addition to the release of US CPI & the FOMC minutes, the latest API crude stockpile inventory figures are expected. Last week the data showed a surprise rise in inventories by 951,000 barrels. Expectations are for another build of 100,000 barrels which would mark the third straight weekly rise.

Learn more about trading oil

Where next for crude oil prices?

WTI  crude oil continues to trade in its ascending channel dating back to late August, hitting a 7 year high of $81.85 on Monday. The ascending channel still favours bullish traders meanwhile today’s move lower appears to lack strong follow through.

 The RSI tipped into overbought territory so there is also a good chance that today’s easing in the price is a technical move, bringing the RSI back below 70.

Should WTI take out yesterday’s low of $79.00 then a deeper selloff could be on the cards towards $78.20 October 4 high and $76.50 the September high.

On the flip side a move back above $80 could see the buyers look to target $81.85 once again.

WTI oil chart

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

 

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.