USOIL Tries to Resist the Death Cross
USOil Analysis
Black gold has had a brutal summer, during which prices slumped more than 20%, as the demand side was hit by fears of economic slowdown due to the energy crisis and the aggressive monetary tightening by major western central banks.
This plunge led to the technical formation of a death cross on the daily chart of USOil earlier in September, since the slower EMA50 (orange line) crossed below the faster EMA200 (black line). This is often viewed as precursor of further downside and was last seen in January 2020, before the pandemic drop to sub-zero prices.
On the other hand, the oil market remains very tight and undersupplied, while OPEC+ recently decided to not rollover the September output hike, leading to a 100,000 barrels/day cut for October [1]. As such, the demand/supply push-and-pull carries on, to which the International Energy Agency (IEA) alluded last week.
In it September Short-Term Energy Outlook (STEO), IEA noted that "The possibility of petroleum supply disruptions and slower-than-expected crude oil production growth continues to create the potential for higher oil prices, while the possibility of slower-than-forecast economic growth creates the potential for lower prices". [2]
USOil resists the Death Cross with a rebound from last week's eight month low (82.67), trying to stop the three-month losing streak. Looking at the H4 chart, the commodity has the opportunity to tackle the EMA200 (black line) and the descending trendline from the summer high. Successful effort would pause downside bias and could allow it to look towards 98.69-100.00 and beyond, but we are still a bit cautious.
Despite the recent rise, USOil is still in a tough spot and in risk of renewed pressure towards 78.23, but a catalyst will likely be needed for a break and further decline.
Market participants now turn to the economic calendar for US CPI Inflation update from and the Oil stockpiles.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 13 Sep 2022 https://www.opec.org/opec_web/en/press_room/7002.htm | |
| Retrieved 23 Sep 2023 https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf |
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