Home Forex Markets WTI oil prices supported by ‘production cut’ talk, market focus on EIA and Powell speech

WTI oil prices supported by ‘production cut’ talk, market focus on EIA and Powell speech

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WTI oil prices supported by ‘production cut’ talk, market focus on EIA and Powell speech


Summary: “Supply cut” comments rattled oil markets ahead of U.S. crude stockpiles data; RSI suggests oil’s recent pullback may be short-lived – downtrend is very complete; API and EIA stock data are expected to shrink further.

The Saudi energy minister said in an interview with Bloomberg that OPEC+ has the tools to meet challenges in the oil market, including production cuts. The market reacted quickly, with WTI and Brent prices surging 1% and 0.8%, respectively. As summer, the U.S. driving season, draws to a close and gasoline prices steadily drop, U.S. motorists have breathed a sigh of relief at the pump. While prices have fallen, WTI is slightly below its pre-war level in Ukraine at $93.

Comments from the Saudi energy minister appeared to help oil prices fail to make new lows after hitting a low of 85.75 – as evidenced by the long daily lower shadow on Monday.

Oil prices for the short-term last week are now just below their pre-war level in Ukraine, around 93, which supported prices for much of the second quarter. Resistance appears at 93, then 96.44, and the 100 psychological level.

It is important to note that the pullbacks over the past few weeks have been relatively short-lived, and the RSI shows a trend toward the 50-line before the drop in oil rates, which we are now approaching. Therefore, if the price breaks 93 strongly, then investors may factor in continued upside action.

Support is found at 88.40 (61.9% Fibonacci level), followed by the year’s low at 85.75.

WTI (CL1!) Daily Chart

Risk events of the week

Tuesday’s American Petroleum Institute (API) crude oil inventories and Wednesday’s U.S. Energy Information Administration (EIA) crude oil inventories are likely to affect oil prices, which are expected to fall by 1.5 million barrels this week on the basis of the previous week’s EIA crude oil inventory decline of 7.05 million barrels. .

Oil prices have continued to slide since July amid demand destruction, and it appears that talk of a “tight supply” is re-emerging.

Another factor to consider this weekend is the annual Jackson Hole central bank meeting, which is not directly related to the oil market but could have broader implications for overall market sentiment. The meeting is seen by some investors as a “pseudo-Fed meeting” and could have market implications given the FOMC’s recent shift from forward guidance to a more data-dependent, gradual policy approach. Federal Reserve Chairman Jerome Powell will speak on Friday.

WTI oil prices supported by 'production cut' talk, market focus on EIA and Powell speech

WTI Crude Oil IG Client Sentiment

Nearly 62.97% of clients are net long, and the ratio of net longs to net shorts is 1.70:1. Net longs rose 1.49% from yesterday and fell 24.79% from last week. The number of net short positions decreased by 0.62% from yesterday and increased by 47.89% from last week. The IG sentiment index is often used as a contrarian indicator, and most retail investors are net long suggesting that U.S. oil futures may fall. However, net long positions increased from yesterday but decreased from last week. Combined with the current retail investor sentiment and the latest changes in positions, the outlook for US oil futures is even more unclear.

(Richard Snow)

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