CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Crude Oil Outlook: Entering the Rate Cut Month

Article By: ,  Market Analyst
September 1, 2024 2:00 PM

Previous Week Recap

  • US GDP Revision: Upward adjustment from 2.8% to 3%, signaling economic strength
  • US Core PCE: Remains steady at 0.2%
  • Chinese Manufacturing PMI: Dropped to its lowest levels in 2024
  • Chinese Non-Manufacturing PMI: Hovering near yearly lows but still above the 50-expansion mark
  • Libya's Oil Production: Reduced by 68% due to regional conflicts

Week Ahead

  • US ISM Manufacturing PMI (Tuesday)
  • Crude Oil Inventories (Wednesday)
  • US ISM Services PMI (Thursday)
  • US Non-Farm Payrolls (Friday)

OPEC Policies 

Following the latest OPEC meeting, where production quotas were maintained until October, the possibility of an output increase is beginning to be priced into the markets. Expectations of increased output, as indicated by reports from OPEC members, are adding bearish pressures and driving oil prices closer to their yearly lows.

Global Demand Outlook

On a global scale, the upward revision of US GDP to 3% reflects a positive outlook, but concerns persist with Chinese Manufacturing and Non-Manufacturing PMIs hovering near 2024 lows. The upcoming data, including the US ISM Manufacturing and Services PMIs (Tuesday to Thursday), will be critical, with Friday’s non-farm payrolls report serving as a key indicator that could shape the Fed's decision on the September rate cut.

Crude Oil Inventories

The latest crude oil inventories showed a positive change from -4.6M to -0.8M, but the effect on oil prices has been limited. This is due to the volatile interplay between geopolitical tensions, supply concerns, and mixed demand outlooks from both the US and China, alongside the fluctuating state of the US Dollar near December 2023 lows.

Technical Outlook

Crude Oil Outlook: USOIL – 3 Day Time Frame – Log Scale

Source: Tradingview

Oil remains indecisive as it struggles to break out from its primary consolidation. Throughout August, a smaller consolidation pattern emerged, with lower highs and higher lows, as oil retested its 2024 starting point.

The 3-Day Relative Strength Index (RSI) is trending below the trendline that connects its yearly lows, suggesting a lean towards a bearish trend. If oil breaks below the critical 70-69 support zone, the trend is expected to extend towards the 65 and 60-58 zones. On the upside, if oil re-enters its primary and minor consolidation ranges, surpassing the 77.90 mark, the next levels to watch are 80 and 82, which could reverse the current bullish spikes.

As we enter September, the market's attention is focused on the rate cut sentiment. However, with the likelihood of priced-in effects and the influence of OPEC’s policies, there is a close watch on the potential for bearish pressures.

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

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024