October Crude Oil
Last week’s comments ended with a summary stating that crude oil is in a news driven market and that fresh news will be necessary to drive the volatility and the price action. The key underlying story for a bullish scenario remains the possibility of an early production cut by OPEC.
This week’s inside move on the weekly chart suggests investors are still waiting for bullish news. The inside move typically indicates investor indecision. It also indicates impending volatility.
The major market players remain on the short side. They will continue to defend the long-term downtrend on the weekly chart until they are overwhelmed by massive short-covering and that isn’t likely to occur unless OPEC actually cuts production.
Speculative buyers appear to be willing to support the market on breaks. They may be willing to do this as long as the OPEC news is still out there. In the meantime, they seem to be content with buying the dips rather than chasing prices higher. Their reason for buying may be related to U.S. production cuts.
Outside factors may also be influencing the price action. Next week, the U.S. Federal Reserve will release its latest monetary policy statement. It may raise interest rates for the first time since 2009. This news can produce a two-sided effect.
Firstly, over the short-run, an interest rate hike will drive the U.S. dollar higher. Since crude oil is dollar-denominated,…