Market update: Crude oil flies high with markets eyeing a fed pause

[MongiIG]

Crude oil’s leap to new highs appears intact for now after a combination of production cuts and an inventory rundown boosted oil prices.

 

Source: Bloomberg

 

Commodities Petroleum United States WTI Price of oil Federal Reserve

Daniel McCarthy | Strategist, | Publication date: Tuesday 05 September 2023 

The crude oil price is holding onto loft levels going into a new week of trading after making fresh highs on Friday with markets mostly seeing a good US jobs report.

The WTI futures contract made a 10-month peak at US$86.09 while the Brent contract traded above US$89 for the first time since January.

Production cut announcements from Saudi Arabia and Russia exasperated a fragile market after US inventory data revealed a surprising run down of stocks over the week prior.

Last week, the American Petroleum Institute (API) inventory report showed -11.486 million fewer barrels, while the US Energy Information Agency (EIA) weekly petroleum status report revealed a notable drop of -10.584 million barrels.

More jobs but US unemployment on the rise

Friday’s US non-farm payrolls (NFP) were seen as positive overall with more jobs added than anticipated but the unemployment rate saw an uptick.

This was due to a higher participation rate and some downward revisions to prior readings. At the end of the day, the Fed is now widely forecast to remain on hold at its Federal Open Market Committee (FOMC) meeting later this month.

US economic calendar

 

Source: DailyFX

The US had its Labour Day holiday yesterday and cash Treasury markets were closed but bond futures were pointing toward a slight uptick in yields. Canada was also on a Labour Day break.

The US dollar is little changed although generally slightly weaker on Monday, but Asian-Pacific (APAC) equities have seen a good day.

Of the main indices, Hong Kong’s Hang Seng Index (HSI) has led the way higher, up over 2.5% today.

Metals markets are firm again after solid gains last week. Spot gold continues to trade near US$1,940 an ounce.

Looking ahead for the week, the Reserve Bank of Ausralia (RBA) and Bank of Canada will be making interest-rate decisions on Tuesday and Wednesday respectively.

The Association of Southeast Asian Nations (ASEAN) summit in Jakarta gets under way tomorrow and the G20 will start later in the week in New Delhi.

Seven Federal Reserve Bank (Fed) speakers are due to give thoughts publicly throughout the week but, closer at hand, ECB President Christine Lagarde will be talking later today.

WTI crude oil technical analysis

The WTI futures contract has eased today after making a stellar run higher last week, eclipsing the mid-August peak to trade as high as 86.09.

Resistance could be at the breakpoint of 90.39 or at the twin peaks near 93.74.

On the downside, support may lie at the breakpoints near 84.90, 83.50, 84.30 and 81.75.

Further down, there is a breakpoint, prior low and the 55-day simple moving average (SMA) in the 77.30 77.50 area which might provide a support zone.

Crude oil daily chart

 

Source: TradingView

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