Crude Oil Price Halts Three Day Selloff as US Crude Inventories Contract

Crude Oil Talking Points

Oil prices are ending a three-day sell-off after a larger-than-expected decline in US inventories, and crude may stage a bigger rebound in the coming days as it snaps a series of lower highs and lows carried over from the previous week.

Crude Oil Price Halts Three-Day Sale as US Crude Inventory Contract

Data prints coming out of the US seem to be boosting the price of oil, as the 7.056M decline in crude inventories encourages an improved outlook for consumption, and it remains to be seen whether the developments will affect consumption. Organization of Petroleum Exporting Countries (OPEC) like the group plans to increase production by “0.1 mb/d for the month of September 2022.”

Evidence of robust demand may prompt OPEC to boost production for the rest of the year even as the most recent Monthly Oil Market Report (MOMR) warns that “volatility in futures markets remained fueled by expectations of lower GDP growth,” and the price of oil may face headwinds before the next one Ministerial Meeting on September 5 because the update reveals that “for 2022, world oil demand is forecast to rise by 3.1 mb/d, a downward revision of 0.3 mb/d from last month’s estimate..”

As a result, “tTotal oil demand is forecast to average 100.03 mb/d” compared to July’s 100.29 mb/d forecast, while “thThe 2023 forecast remained the same as the last MOMR at 2.7 mb/d,” with demand projected to reach 102.72 mb/d.

The forecasts suggest that OPEC will continue to boost production as energy consumption is expected to increase in 2023, but signs of tight supply may keep the price of oil afloat as US production tapers for the first time in five weeks.

A deeper look at the Energy Information Administration (EIA) figures shows weekly field production narrowing to 12,100K in the week ending August 12 from 12,200K the previous week, and current market conditions may lead to an imminent rebound in the price . of oil as indications of robust demand are met with signs of supply-side constraints.

That said, the price of oil may stage a larger recovery over the coming days as it cuts the series of lower highs and lows carried over from the previous week, but a rebound from the monthly low ($85.73) may turn out to be close. -term correction as crude fails to defend the February low ($86.55).

Crude Oil Daily Chart

Source: Business View

• The price of oil seems to be finding support before the former resistance zone around the October 2021 high ($85.41) as It captures the series of lower highs and lows carried over from last week, with the close above $88.10 (23.6% expansion) raising the scope for a move to the $90.60 (100% expansion) to $91.60 (100% expansion) region.
• Next area of ​​interest comes around $93.50 (61.8% pullback) to $95.30 (23.6% expansion)with a break above the monthly high ($98.65) opening the $100.20 (38.2% expansion) region
• However, the a rebound from the monthly low ($85.73) may turn out to be an imminent correction because the 50-Day SMA ($101.69) reflects a negative slope, and a lack of momentum to hold above. $88.10 (23.6% expansion) maybe spur another run at the Maximum in October 2021 ($85.41).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong