Crude Oil Analysis: Upside Risk Persists

Key Events

Supply risks proceed to dominate ceasefire hopes
US inventories rise to 6-month highs
Crude Oil call options dominate puts for Q4
Open Interest on Brent Options rises to record highs

Source: Bloomberg

Beyond the increasing US oil inventory data to 6-month highs on Wednesday, reaching a positive change of 5.5M barrels, global economic growth metrics and geo-political conflicts in the middle east are driving volatility in crude oil markets.

The surge in open interest on Brent Crude Oil options reflects growing uncertainty around supply disruptions, policy shifts, US elections, the expanding BRICS alliance, and fluctuating inflation rates alongside central bank policies. A possible contrarian perspective for oil trends is expected to step into the play, aligning with the primary bear trend established since 2022.

Technical Outlook

Crude Oil Analysis: 3Day Time Frame – Log Scale

Source: Tradingview

The latest rebound for crude oil has been fundamentally supported by supply risks, with additional technical factors backing the rebound:

Trendline support connecting the September 2024 lows
Respect for the mid-channel support/resistance established since October 2023.
Formation of a bullish engulfing pattern near the $68 support zone.
The Relative Strength Index (RSI) is holding above its 34-period moving average.

While the primary trend remains bearish, there is potential upside risk toward $73 and $75 before confirming a full bullish scenario.

From the downside, the 64-65 zone remains a key support before ensuring an extended downtrend towards the 60-58 zone.

--- Written by Razan Hilal, CMT – on X: @Rh_waves

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