Oil slips on the last day of (another good) month ahead of OPEC

Up until yesterday’s high, things were going well for the oil rally. Prices broke out of a tight consolidation on Thursday thanks to a weaker US dollar and a large drawdown of inventories as US ‘driver season’ was underway. News that China was indeed scaling back lockdown restrictions, alongside the EU’s failure to man up and ban Russian oil imports simply added to the long list of reasons to send oil higher. Yesterday the front-month futures contract broke to a 12-week high and came close to cracking $120 – but it didn’t.

News that some OPEC members were mulling over whether to remove Russia from their production caps saw a sharp reversal in oil prices. This raised concerns that the market could be hit with new supply, as the caps would no longer apply to Russia – a country that is reliant upon oil exports to fund its crumbling economy during a war with Ukraine. Whether this is enough to turn the tide against the multiple supporting factors behind oil’s rally (China reopening, EU embargo) is debatable. But it can also be argued that much of the drivers behind oil’s recent rally has been priced in. Regardless, we can see that some wind has been taken out of the oil rally sails.

With that said we do have the OPEC+ meeting tomorrow. For us to see any sizeable pullback then OPEC will likely have to increase production above the expected 432k bpd. Yet Russia’s expulsion and the potential for other oil cartels to increase production also need to be factored in.

How to start oil trading

WTI daily chart:

Yesterday’s impressive gains were quickly erased as prices fell back below the key breakout level of 116.64 – which effectively means we saw a ‘fakeout’ at resistance. A bearish divergence has also formed with the stochastic oscillator, which shows momentum was waning at these highs. So whilst prices remain beneath 116.64, we may see another dip lower before buyers step back in.

WTI 1-hour chart:

The hourly chart shows a trendline break before support was found at the 100-hour eMA. A bullish candle formed with high volume, and the stochastic oscillator generated a buy signal. We therefore suspect a countertrend rally to 116 before prices create a swing high and move back towards 113, near the 200-hour eMA and weekly pivot point.

How to trade with City Index

You can easily trade with City Index by using these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

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.