Crude Oil Analysis: WTI and Brent Dump to Multi-Month Lows

WTI, Brent Crude Oil Key Points

The bullish supply-demand picture from the third quarter has reversed, driving crude oil prices sharply lower so far this week.
WTI is testing the 61.8% Fibonacci retracement of its mid-year rally, with a break below there potentially targeting $70 next.
Brent has already broken below its own 61.8% Fibonacci retracement, and bears are eyeing $77 next.

WTI, Brent Crude Oil Fundamental Analysis

When analyzing oil prices, it always comes back to fundamental supply and demand.

Through the third quarter of this year, when the US economy was growing at a far better pace than expected and traders were concerned about the potential for supply disruption from conflicts in the Middle East, oil prices surged by nearly 30%.

Now though, as we’ve shifted into the fourth quarter, those trends have reversed. While the humanitarian cost of the Israel-Hamas war continues to grow, analysts are increasingly confident that it won’t spread into a broader regional conflict that disrupts oil production. Meanwhile, reports out of Russia suggest that the country may be exporting more oil than expected after the country vowed to voluntarily reduce shipments by 300k bpd until the end of the year. At the same time, recent ISM figures from the US, Eurozone, and China all missed expectations, suggesting that the global economy downshifted heading into the 4^th quarter.

The supply-demand tide has clearly shifted in the oil market, and unless we see imminent signs that supply will be disrupted or accelerating growth in the global economy, crude prices are likely to remain under pressure.

Crude Oil Technical Analysis – WTI Daily Chart

Source: TradingView, StoneX

As the chart above shows, WTI Crude Oil is in the midst of a strong selloff. After breaking down below a symmetrical triangle pattern in late October, WTI has been in freefall, with prices now testing the 61.8% Fibonacci retracement of the mid-year rally near $75.00. The 14-day RSI is testing oversold levels for the first time in eight months, so a brief bounce cannot be ruled out, but the dominant trend remains to the downside for a potential move toward the 78.6% Fibonacci retracement near $70 unless something major changes.

Crude Oil Technical Analysis – WTI Daily Chart

Source: TradingView, StoneX

Brent Crude Oil, the more global benchmark for oil prices, is seeing a similarly deep selloff of its own. Brent prices sliced straight through support at 83.00 yesterday, and the selling pressure has continued into today’s trade; in fact, Brent prices are trading below $80.00 for the first time since July! Moving forward, the 61.8% Fibonacci retracement has clearly been broken at this point, opening the door for a continuation down toward the 78.6% Fibonacci retracement near $77.00 next.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

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 www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.