USOIL Subdued as Markets Digest Russian Fuel Export Ban, US Debt Jitters & Hawkish Fed

USOIL Analysis

The US Fed paused its tightening cycle last week, but maintained a hawkish bias. It kept the door open to one more hike this year for rates to peak and raised its 2024 median rate forecast to 5.1% (from 4.6% previously), strengthening the higher-for-longer-prospects. Markets still believe that the terminal rate has already been reached, but pricing for the first cut has been pushed to July 2024 according to CME's FedWatch Tool. [1]

Oil prices reacted negatively to the Fed outcome and dropped last week, with markets now grappling with another spending dispute in US Congress. This produces renewed risk for a government shutdown, just as the US Debt surpassed $33 trillion for the first time, according to the Treasury Department.

There is scope for further USOil pullback towards the EMA200 (85.50) and daily closes below it could halt the bullish bias. However, strong catalyst would be required for that and the downside appears well-protected.

It hard to envision a steep decline at this point, given tight supply and shrinking inventories. Saudi Arabia and Russia recently extended their 1.3 million barrels/day combined supply curbs, to the end of the year. Adding to the tight conditions, Russia announced a ban on gasoline and diesel exports last week. [2]

On the technical front, USOil runs its fourth straight profitable month and hit new 2023 highs last week (93.76), despite the pullback. It defends the 38.2% Fibonacci of the last leg up and remains at the driver's seat, with the ability set higher highs. We are cautious at this stage though for further gains twards $100, as the descending trend line form the 2022 multi-year highs looms (at around 96.80).

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Nikos Tzabouras

Senior Financial Editorial Writer

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.



Retrieved 25 Sep 2023


Retrieved 24 May 2024

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