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  • Oil prices were rejected on the corrective bounce, WTI remains below 21-DMA.  
  • Oil prices attempting to rebound from the biggest weekly fall since mid-July, but falter in US session.

West Texas Intermediate crude oil is currently trading -0.25% at $52.80 having travelled between 454.04 and $52.58. The price of a barrel of oil was unable to correct convincingly and remains pressured within a steep bearish decline on fears of a global recession ahead of Chinese and US trade talks set to kick off this week.

There has been some word that the Chinese will be ready to do a deal on parts where  the two sides agree upon. However, the news highlights that the tougher issues will not be resolved until next year which just goes to show that trade wars are here to stay – which will ultimately be a weight on the demand side when considering the value of oil.  

“Demand worries continue to roil energy markets, as disappointing manufacturing data across China, Europe and the US saw markets price out any impact, both physical and geopolitical, from the Saudi facility attacks,” analysts at TD Securities explained:

  • “Indeed, traders are increasingly concerned that deeper cuts from OPEC+ will be needed for any chance of a balanced market in 2020, but it could be difficult for Saudi to persuade its allies to cut more when the cartel meets in December.”
  • In this context, money managers will be watching for the EIA’s Short Term Energy Outlook ahead of this week’s trade talks with the 2020 demand forecast in mind as bearish sentiment grips the market. That being said, with CTAs now having completed their recent selling program, the marginal offer in energy markets may be on the wane.”

As for futures, they were  attempting to rebound and November delivery climbed 67 cents, or 1.3%, to $53.48 a barrel. This followed the black gold correcting from an  eight-day losing streak last week by the close.

Looking ahead

Looking ahead,  global oil demand forecasts from the Organization of the Petroleum Exporting Countries on Thursday and the International Energy Agency on Friday will likely be a key driver while US events in the Federal Open Market Committee minutes as well as Federal Reserve’s governor Powell speaking along with US Consumer Price Index will be interim drivers as well.

Oil levels

On the upside, the 21-DMA is located around 55.40 while the 200-DMA resides around 56.80 – as being a key resistance target. A break below the 50 handle opens the Nov 2018 lows at 49.39 is guarding risk to the 18th Dec lows at 45.77 ahead of the dec double bottom lows below 42.50.