US West Texas Intermediate crude oil futures are up late in Thursday’s session, but off their intraday high. Prices were supported throughout the session by a weaker US dollar, tight US supply and hopes of improved fuel demand in China after COVID-19 restrictions eased in two major markets. cities.
The prospect of a lower Russian oil price cap is also providing support, analysts said. European Union governments tentatively agreed on Thursday to a $60 cap on Russian oil transported by sea, an EU diplomat said.
The wild card is OPEC+, which is hosting a virtual meeting on Dec. 4 to discuss policy.
Technically, January WTI crude oil futures are in a position to show a potentially bullish closing price reversal floor. This won’t change the uptrend, but if confirmed next week, it could trigger the start of a 2-3 week countertrend rally.
The US dollar hits its lowest level in four months
The U.S. dollar fell to a 16-week low against a basket of major currencies on Thursday after data showed U.S. consumer spending rose sharply in October, while inflation moderated, adding to concerns. expectations that the Federal Reserve is closer to peaking in interest rates.
A weaker greenback tends to increase foreign demand for dollar-denominated crude oil.
China relaxes its zero-COVID strategy
Optimism about China’s oil demand recovery was lifted on Wednesday as the cities of Guangzhou and Chongqing announced the easing of COVID restrictions. It happened one day…
US West Texas Intermediate crude oil futures are up late in Thursday’s session, but off their intraday high. Prices were supported throughout the session by a weaker US dollar, tight US supply and hopes of improved fuel demand in China after COVID-19 restrictions eased in two major markets. cities.
The prospect of a lower Russian oil price cap is also providing support, analysts said. European Union governments tentatively agreed on Thursday to a $60 cap on Russian oil transported by sea, an EU diplomat said.
The wild card is OPEC+, which is hosting a virtual meeting on Dec. 4 to discuss policy.
Technically, January WTI crude oil futures are in a position to show a potentially bullish closing price reversal floor. This won’t change the uptrend, but if confirmed next week, it could trigger the start of a 2-3 week countertrend rally.
The US dollar hits its lowest level in four months
The U.S. dollar fell to a 16-week low against a basket of major currencies on Thursday after data showed U.S. consumer spending rose sharply in October, while inflation moderated, adding to concerns. expectations that the Federal Reserve is closer to peaking in interest rates.
A weaker greenback tends to increase foreign demand for dollar-denominated crude oil.
China relaxes its zero-COVID strategy
Optimism about China’s oil demand recovery was lifted on Wednesday as the cities of Guangzhou and Chongqing announced the easing of COVID restrictions. It came a day after protesters in southern Guangzhou clashed with police amid a series of demonstrations against the world’s toughest coronavirus restrictions.
US crude inventories plunge as production climbs to highest since March 2020
Crude inventories fell 12.6 million barrels in the week to Nov. 25 to 419.1 million barrels, the Energy Information Administration said on Wednesday, amid expectations from a Reuters poll for a drop. of 2.8 million barrels.
The decline was attributed to refiners continuing to boost activity to counter weak US inventories heading into the winter heating season.
EU tentatively agrees to $60 price cap on Russian maritime oil
European Union (EU) governments tentatively agreed on Thursday to a $60-a-barrel price cap for Russian maritime oil – an idea of the Group of Seven (G7) countries – with a mechanism to adjustment to keep cap 5% below market price, according to diplomats and a document seen by Reuters.
The deal still needs to be approved by all EU governments in a written procedure by Friday. Poland, which had been pushing for the cap to be as low as possible, had not confirmed on Thursday whether it would support the deal, a European diplomat said.
This is a potentially bullish move as it could lead to lower global supply.
OPEC+ will meet virtually
OPEC+ is set to meet virtually on December 4. Earlier in the week, there were rumors that the group was considering cutting production due to expectations of lower demand and a lack of clarity about the impact of the impending Russian oil price cap on the market.
However, traders now believe that since the meeting is being held virtually, there is very little chance of a major policy change. If they make a surprise cut, look for a volatile upside spike.
Weekly technical analysis
January WTI Crude Oil Weekly
Analysis of trend indicators
The main trend is down according to the weekly swing chart. A move to $92.53 will change the main uptrend. A trade at $73.50 will signal the resumption of the downtrend.
The minor trend is also down as well as the momentum.
Retracement level analysis
The short-term range is $108.63-$73.50. Its retracement zone at $91.07 to $95.21 is resistance. It stopped the rally two weeks ago at $92.53.
The main range is $60.23 to $108.63. The market is currently testing its retracement zone at $84.43 to $78.72. This is a potential support zone.
The contract range is $35.98 to $108.63. Its retracement zone from $72.31 to $63.73 is the next major downside target and value zone. This week’s low at $73.50 stopped a little above this area.
Weekly Technical Forecast
The direction of the January WTI Crude Oil market the week ending Dec. 9 will likely be determined by the reaction of traders at $76.28.
Bullish scenario
A sustained move above $76.28 will signal the presence of buyers. This could fuel a rally to $84.43. Breaking above this level could lead to a retest of the $91.80 retracement zone at 97.77. The latter is a potential trigger point for an upward acceleration.
Downside scenario
A sustained move below $76.28 will indicate that the selling pressure is building. This could trigger an acceleration towards the major 50% level at $72.31. This is a potential trigger point for acceleration to $63.73.
Short-term outlook
Technicals came to the fore this week, with the January WTI crude oil futures contract set to post a dramatic and potentially weekly closing price reversal low. A close above $76.28 will form this chart pattern.
We probably won’t see a short-term trend change, but if this chart pattern is confirmed next week, we could see the start of a 2-3 week countertrend rally.
If the chart pattern fails, look for a sell that may extend from $72.31 to $63.73. This is a value zone, so we expect to see buyers diving into this zone.
Traders seem to be waiting for a catalyst. The next catalyst could be a relaxation of COVID restrictions by China, a surprise production cut from OPEC+, or clarity on the impact of the cap on Russian oil. A sharp decline in the US Dollar could also be seen as a bullish catalyst.
The bullish factors seem to be adding up but the buyers seem reluctant to take an aggressive stance on the December 4 OPEC+ decision.
