Crude Oil Outlook: Yearly Lows vs OPEC Reports

Key Events for the Week Ahead

Oil Market Reports:

OPEC Monthly Report (Tuesday)
EIA Short-Term Energy Outlook (Tuesday)
US Crude Oil Inventories (Wednesday)
IEA Oil Market Report (Thursday)

Chinese Economic Data:

Chinese CPI y/y and PPI y/y (Monday)
Chinese New Loans (Tuesday)
Chinese Industrial Production and Retail Sales (Saturday)

US Economic Data:

US CPI y/y, US CPI m/m, and Core CPI m/m (Wednesday)
US PPI, Core PPI m/m, and Unemployment Claims (Thursday)

Oil Market Reports

As oil stands at critical yearly lows, higher weight can be attributed to the upcoming monthly reports and outlooks from OPEC, IEA, and EIA this week. The supply production quotas that were forecasted to be elevated during October have reached a turning point given the respective yearly weakness of oil prices.

OPEC’s intervention with supply cuts at the start of 2024 significantly boosted gains, in line with broader market sentiment around potential rate cuts. This scenario presents a potential déjà vu, as the alignment of policies and the growth in global demand outlook mirrors previous patterns. Should this alignment fail, however, further weakness could push prices toward the lower end of the $60 range.

Chinese Economic Data

Tough headwinds on oil prices were rippled from the Chinese economy as it hit 15-year lows with new loans and foreign direct investment, alongside a weaker-than-expected manufacturing PMI data.

Upcoming indicators, including Chinese inflation, new loans, retail sales, and industrial production, will shed further light on the Chinese economy's trajectory and its impact on global oil demand and price levels.

US Economic Data

The final determination of the rate cut magnitude—currently priced at a 70% probability for a 25bp cut and a 30% probability for a 50bp cut, according to the CME Fed Watch Tool—will likely be influenced by the upcoming US CPI indicators. The latest non-farm payrolls data strengthened the US Dollar's position against the market, as it exceeded expectations with an addition of 142,000 jobs, compared to the previous 89,000.

Subsequent comments from Fed members Williams and Waller have further supported the likelihood of a rate cut, citing the slowing inflation and a moderating labor market.

Technical Outlook

Crude Oil Analysis: USOIL – Weekly Timeframe – Log Scale

Source: Tradingview

Oil continues to decline after a bearish breakout from its consolidation range, entering a high-volatility zone marked by sharp rebounds between May and June 2023. The first support level to watch is near $65.30. A close below $65 could signal further declines toward the $60 and $58 levels.

If oil manages to repeat a volatile pattern in the following 68 zone, alongside the resurgence of positive fundamentals on the commodity, levels 71 and 76 are ready to offer the next resistance levels alongside its primary bearish pattern.

High volatility can be expected near the $67-$68 price range, given past sharp rebounds from this area, potential market interventions, and irregular supply disruptions due to geopolitical tensions.

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

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.