December WTI crude oil futures finished higher on Thursday, putting the market in a position to close higher for the week. The bullish price action was fueled by a number of factors including optimism over record U.S. crude exports, signs that recession fears are fading and a weaker U.S. Dollar. Helping to put a cap on gains were worries over demand from China.
Longer-term traders noted that the start of OPEC+ production cuts and the European Union's embargo on Russian crude oil were also underpinning prices all week.
US Crude Exports Surge to Record - EIA
U.S. crude oil stockpiles rose in the most recent week, even as the volume of exports hit an all-time record, the Energy Information Administration reported on Wednesday.
Crude inventories rose by 2.6 million barrels in the week to Oct 21 to 439.9 million barrels, nearly triple analysts' forecasts in a Reuters poll for a 1-million-barrel rise.
The big surprise that drove prices higher, however, was the news that crude exports surged to a weekly record of 5.1 million barrels per day, cutting net crude imports to just over 1 million bpd, also a record.
Crude Supported after GDP Report Showed Some Signs of Inflation Easing
Crude oil was also underpinned on Thursday after the latest U.S. GDP report showed some signs that inflationary pressures could be easing.
The report for U.S. Gross Domestic Product showed 2.6% economic growth in the third quarter. Economists surveyed by Dow…
December WTI crude oil futures finished higher on Thursday, putting the market in a position to close higher for the week. The bullish price action was fueled by a number of factors including optimism over record U.S. crude exports, signs that recession fears are fading and a weaker U.S. Dollar. Helping to put a cap on gains were worries over demand from China.
Longer-term traders noted that the start of OPEC+ production cuts and the European Union's embargo on Russian crude oil were also underpinning prices all week.
US Crude Exports Surge to Record - EIA
U.S. crude oil stockpiles rose in the most recent week, even as the volume of exports hit an all-time record, the Energy Information Administration reported on Wednesday.
Crude inventories rose by 2.6 million barrels in the week to Oct 21 to 439.9 million barrels, nearly triple analysts' forecasts in a Reuters poll for a 1-million-barrel rise.
The big surprise that drove prices higher, however, was the news that crude exports surged to a weekly record of 5.1 million barrels per day, cutting net crude imports to just over 1 million bpd, also a record.
Crude Supported after GDP Report Showed Some Signs of Inflation Easing
Crude oil was also underpinned on Thursday after the latest U.S. GDP report showed some signs that inflationary pressures could be easing.
The report for U.S. Gross Domestic Product showed 2.6% economic growth in the third quarter. Economists surveyed by Dow Jones were expecting 2.3%.
In addition to showing stronger-than-expected growth, the GDP report provided at least some good news on inflation.
The bright spot in the report wasn't growth, it was prices. The GDP Price Index slowed dramatically quarter over quarter and came in below expectations. This is another sign pointing to the likelihood that the worst of inflation may be behind us.
Hope Fed Could Slowdown Aggressive Rate Hikes Starting in December Leads to Weaker Dollar
Throughout the week, weak U.S. housing and purchasing managers' reports led to speculation the Federal Reserve may announce it was going to slow down the pace of interest rate hikes starting in December.
The news drove the U.S. Dollar sharply lower against a basket of major currencies, driving up foreign demand for dollar-denominated crude oil.
Weekly Technical Analysis
Weekly December WTI Crude Oil
Trend Indicator Analysis
The main trend is down. However, momentum has shifted to the upside following the confirmation of the closing price reversal bottom from the week ending September 30.
A move through $95.55 will change the main trend to up. A trade through $75.70 will signal the resumption of the downtrend.
The minor trend is up. A new minor top has formed at $92.34. A trade through this level will reaffirm the minor uptrend. A trade through the minor bottom at $81.30 will change the minor trend to down.
Retracement Level Analysis
The short-term range is $110.78 to $75.70. With momentum shifting to the upside, its retracement zone at $93.24 to $97.38 becomes the primary upside target and potential resistance zone.
The new minor range is $92.34 to $81.30. Its pivot at $86.82 is the nearest support.
The main range is $60.20 to $110.78. The market is currently trading on the bullish side of its retracement zone at $85.49 to $79.52, making it support.
The contract range is $34.75 to $110.78. Its retracement zone at $72.77 to $63.79 is the next major downside target and value zone.
Weekly Technical Forecast
The direction of the December WTI crude oil market for the week ending November 4 is likely to be determined by trader reaction to the 50% level at $85.49.
Bullish Scenario
A sustained move over $85.49 will signal the presence of buyers. This could lead to a quick test of the resistance cluster at $92.34 to $93.24, followed by the main top at $95.55 and the Fibonacci level at $97.38. The latter is a potential trigger point for an acceleration to the upside.
Bearish Scenario
A sustained move under $85.49 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the Fibonacci level at $79.52. This is the last support before the main bottom at $75.70. Taking out this level will signal a resumption of the downtrend.
Short-Term Outlook
The price action early in the week focused on the weakness in the global economy including the United States and its potential impact on future demand. However, conditions shifted on Wednesday with the reporting of a record level of U.S. exports.
Sentiment continued to improve on Thursday with the release of a stronger-than-expected U.S. GDP report and signs that inflation may be easing. Moreover, the market also seemed to be pleased that the Fed could begin easing its aggressive tightening policy.
These are all potentially bullish signs that could help spur a rally into $92.34 to $93.24 next week. Overtaking this zone will signal the buying is getting stronger.
Longer-term, the odds of a rally will increase in November with the start of the OPEC+ output cuts and the EU embargo on Russian crude oil.
Comments
Whoa! How does stronger GDP negatively affect inflation? A stronger GDP will drive inflation higher, causing the fed to have to raise the overnight rate even more. And make no mistake, if that number is accurate you're kidding yourself if you think Powell is going to pivot by the end of the year. Those interest rate hikes will be going to the moon!
All that aside, this new GDP report just before the election is suspect. If you recall under the Obama administration, numbers would always come out high and then be revised down a few weeks later. Dems are never sincere. We are most likely right around 0%, but that won't come out until after the election. Fed will then most likely trim hikes to 50 basis points through 2023 and then halve it to 25 through 2024.