Source: Marketscope 2.0
Oil prices are under pressure. FCXM's CFD for Brent, UKOil, and its CFD for WTI, USOil, have charted a lower peak (LP) followed by a lower trough (LT) on their respective weekly charts. This puts both instruments into a defined downtrend on a significant time scale. The market is worried about demand, and this has contributed to the weakness.
This morning, UKOil was trading around $78.50 per barrel, down from its September high of $97,66 per barrel and USOil was trading near $73.85 per barrel, down from its September high of $95.018 per barrel. These are the lowest levels seen since early July and are in line with a decline in total capacity utilisation (TCU), which is a measure of demand.
TCU printed at 78.9% yesterday, that was lower than the 79.4% anticipated and below July's 79.59%. UKOil has a 69% correlation coefficient with TCU and USOil's at 64%. This suggests that if demand shows further signs of slipping, there will be a potential headwind acting against oil prices.
The oil market is now in contango, i.e., spot prices and near-term futures are valued less than futures expiring further out. This indicates a well-supplied market.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.