Crude Oil Weekly Outlook: Over Supply Fears vs Middle East Battles

Key Events for the Week Ahead

• Chinese Manufacturing & Non-Manufacturing PMI (Monday)
• Fed Chair Powell Speech (Monday)
• US ISM Manufacturing PMI and JOLTS Job Openings (Tuesday)
• OPEC JMMC Meetings (Wednesday)
• US ISM Services PMI (Thursday)
• US Non-Farm Payrolls (Friday)
• Developing Middle East Conflicts

China

Following China's recent economic stimulus (a 50-bps cut in the reserve requirement ratio), the impact on oil demand remains unclear. On Monday, Chinese Manufacturing PMIs are set to be released just before the week-long Chinese holiday. The previous report showed a decline near March 2024 lows, sparking concerns about economic growth. The upcoming report will either reinforce bearish signals or indicate a potential rebound.

US Economic Indicators

As October begins, the high-risk event kicking off the month is the Non-Farm Payrolls (NFP) report on Friday, which could influence the Fed’s November rate cut decision between 25 bps and 50 bps. Leading up to NFP, ISM PMIs on Wednesday and Thursday will offer leading insights into economic growth and oil demand potential. 

OPEC JMMC Meeting

Oversupply fears from OPEC+ policies have been pushed from October to December, as oil prices hit new yearly lows at $65 per barrel, after peaking at $87 per barrel earlier in the year. The scheduled 180,000-barrel production hike is heightening concerns of oversupply, particularly as Saudi Arabia abandons its $100 price target and Libya moves forward with a deal to boost production. All eyes are on Wednesday’s upcoming OPEC+ meeting, which is expected to provide clarity on the oil market’s direction from the supply-demand perspective.

Crude Oil Weekly Outlook: Daily Time Frame – Log Scale

Source: Tradingview

With notable factors at play, determining a clear direction for oil prices this week remains challenging. The insights from OPEC towards an output hike in December are yet to be supported in Wednesday’s OPEC JMMC meeting; on the other hand, the battles in the Middle East are lifting concerns towards a regional war, as remarkable assassinations shift the political game.

Technically speaking, the 65 support remains crucial in signaling either a further decline toward the 60-58 zone or potential bullish reversals. The upper resistance levels are now set as 71.50, 74.30, 76.30, prior to confirming stronger bull trend.

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