CRUDE OIL, OEPC+, FED, FOMC, BANK OF ENGLAND - TALKING POINTS:
- Crude oil prices slid as the WTI contract traded under US$80 a barrel.
- Post-FOMC environment is positive after all main US indices hit highs.
- All eyes on the BoE and OPEC+ meetings. Has crude seen the top for now?
Crude oil slipped on a larger than expected increase in inventory, data released in the US revealed. Figures from the Energy Information Administration / Department of Energy petroleum status report showed an increase of 3.29 million barrels last week against forecasts of 2.3 million.
Additionally, talks between the US and Iran are reported to be going ahead later this month. This would potentially open the way for more oil production from Iran to be exported.
WTI Crude has traded below US$ 80 a barrel while Brent Crude has traded as low as US$ 81.07 a barrel so far today.
Perhaps significantly, OPEC+ are due to meet later today to ratify an increase of 400,000 barrels per day, which is still below market appetite. US President, Joe Biden, has been trying to exert pressure on OPEC+ to deliver more oil.
However, industry experts question the ability of OPEC+ to make material increases right now. OPEC+ have said themselves that they do not expect meaningful increases in production until well into 2022.
Converse to oil prices,UK natural gas prices went significantly higher on conflicting reports about the actual delivery of Russian gas into Europe.
Oil prices going lower went against the grain of the post-FOMC environment as most risk assets were sought after. All the major equity indices in the US made record highs and commodity currencies rallied as the US yield curve steepened.
Market-priced US inflation, tracked through the break-evens, whipsawed at the short end but ended close to where they started. Longer ends ticked up a bit.
The de-coupling of rate hikes to other stimulus measures within monetary policy has been successfully achieved by the RBA and the Fed.
The Bank of England on the other hand have a different situation, as the markets have priced in a 15-basis point rate hike at today’s meeting. GBP/USD bounced after the FOMC but has drifted lower in the Asian session.
APAC equities were mostly positive after the US lead.
Ahead, all eyes will be on the Bank of England rate decision. Then later in the US, there will be jobs and trade data.
CRUDE OIL TECHNICAL ANALYSIS
West Texas Intermediate (WTI) crude oil has broken out of an ascending channel as it went below a previous low of 80.78. This level could offer resistance as a pivot point. Another previous low of 79.42 was not breached and may provide support.
Below that, there are a series of previous lows and pivot points that are potential support levels at 74.96, 73.14 and 69.39. On the topside, the previous highs at 84.88 and 85.41 might offer resistance.
This move down saw the price move below the 10-day simple moving average which possibly suggests a pause in short-term bullish momentum. The 34-day SMA is currently at 79.22 and may provide support but a move below there could see bearish momentum evolve.
Written by Daniel McCarthy, Strategist for DailyFX.com. 4th November 2021