WTI OIL PRICE, CHARTS AND ANALYSIS:
WTI TECHNICAL OUTLOOK: NEUTRAL
- WTI Finished Higher for a Second Successive Week with Technicals Hinting at Further Upside.
- Middle East Conflict to Remain a Critical Driver as it Continues to Underpin Oil Prices.
- US-Venezuela Deal Unlikely to Have Any Material Impact
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WTI OIL WEEK IN REVIEW
Crude Oil is on course for another bullish week despite a sluggish Friday that saw Oil prices fluctuate between gains and losses. Geopolitical developments continue to overshadow the usual fundamentals such inventories data and comments from OPEC officials.
Most Read: Oil Embargo of 1973 and Potential Implications
Earlier in the week the deal between Venezuela and the United States regarding the lifting of sanctions and a temporary license of 6 months was seen as a potential positive. Market participants had hoped this would inject a fresh glut of supply to markets and thus helping lower oil prices. However, experts warned that most probably will not be the case given the conditions of the Oil fields and infrastructure due to underinvestment and sanctions. OPEC for its part sung a similar tune stating that they do not see the lifting of sanctions as having any major impact in the short-term. All of the above hinting at time before the return of pre-sanctions output by Venezuela.
Source: Refinitiv
The comments by experts and OPEC could not have come at a worse time as it was compounded by the start of a ground offensive by Israel into Gaza and fresh attacks at Israel and US bases in Lebanon and Iraq respectively. Although this was not the work of any country but rather various rebel and terror groups in the region the fear of contagion grew and helped Oil prices regain the $90 a barrel even if it proved temporary. Heading into the weekend and major developments on the Geopolitical front could see oil prices gap up or down when markets open Sunday evening.
RISK EVENTS FOR THE WEEK AHEAD
Next week sees a return of a jam-packed calendar with a host of high impact data events from a host of countries. The US GDP will be key as well as interest rate decisions from the Bank of Canada (BoC) and some inflation data from among others Australia.
A positive GDP reading from the US should keep Oil bulls interested. Market participants had feared a global slowdown in Q4 this year and in the US as well which could have seen demand fears rise and thus pushing oil prices lower. So far there are signs that certain countries are experiencing a slowdown but that hasn’t been enough to deter Oil bulls as the extension of the OPEC production cuts were also extended.
Now toward the end of last week we heard the US Government hopes to buy 6 million barrels of Oil for the strategic petroleum reserve by January, according to the US Department of Energy. According to the reports the department hopes to sign agreements to purchase Oil at $79 a barrel. Any news regarding this could also lead to some short-term volatility.
Another area is Venezuela now that US sanctions on oil have been lifted. Despite reports that not much will change in the short-term by OPEC and analysts alike should Venezuela spring any sort of surprise this could stoke volatility and push oil prices lower.
Lastly the Middle East tensions are likely to remain front and center as tensions escalate. There are many risks posed by an escalation which could include an Oil embargo, blocking of the Hormuz Straight or other supply chain issues.
In short though, no concrete events that I could point to as the main risk driver next week. Rather a lot of ifs/buts when it come to the geopolitical and fundamental risks heading into the week ahead.
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TECHNICAL OUTLOOK
WTI Crude Oil Weekly Chart – October 20, 2023
Source: TradingView
The weekly chart for WTI shows a strong uptrend with a potential higher high looking more likely given that the weekly candle looks set to close as a hammer. If we look at the technical picture from an elliot wave perspective, we are potentially beginning wave 5 which would mean one more rally and a fresh high before a pullback. This would bring first resistance around 92.42 come into focus before recent high around the 95.00 mark. This does seem to tie in with the Fundamentals at play as a ceasefire in the Israel-Palestine situation at this stage does not seem likely. A ceasefire would significantly alter the outlook and could see the technicals take a backseat to a deeper retracement first.
WTI Crude Oil Daily Chart – October 20, 2023
Source: TradingView
The daily timeframe gives us more of a mixed picture as Fridays daily candle just turned red at the time of writing. There is immediate support just below the current price though with the 20-day MA resting at 87.58. A break lower here will have to navigate support at 85.96 before the recent lows around 83.00 mark comes into focus.
Key Levels to Keep an Eye Out For
Resistance levels:
- $90.00
- $92.42
- $95.00
Key support levels:
- $87.58
- $85.96
- $83.00
IG CLIENT SENTIMENT
Taking a quick look at the IG Client Sentiment, 61% of retail traders now holding long positions. Given the Contrarian View to Crowd Sentiment Adopted Here at DailyFX, is this a sign that Oil Prices may be set for a fall?
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| Change in | Longs | Shorts | OI |
| Daily | 7% | -15% | -3% |
| Weekly | -3% | 4% | 0% |
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
