USOil Upbeat on Fed Cut Hopes but Demand Fears Persist
USOil Analysis
Oil prices managed to rebound from their sixteen-month low and started the current week on the front foot on optimism around the Fed's pivot that would strengthen chances of a soft landing. CME's FedWatch Tool now assigns the highest probability to a larger 0.5% cut by the US central bank on Wednesday and 125 bps total worth of cuts total within the year [1]. Other supporting factors include the OPEC+ decision to postpone a schedule output increase by two months and the persistent geopolitical worries.
USOil now has the opportunity to challenge the EMA200 (black line) and the 38.2% Fibonacci of the July-September drop. Daily closes above this confluence would pause the bearish bias, but we are cautious around a wider advance, technically and fundamentally.
Aggressive market bets for the Fed's easing path appear stretched and despite resilient US economy, signs of weakness are evident. China remains a constant source of concern and the latest data did not help as retails sales and industrial production declined. Chinese oil consumption has contracted for four straight months, with both OPEC [2] and the International Energy Agency (IEA) [3] lowering their global demand growth forecasts for 2024 and 2025. The shift away from fossil fuels, even if slow, adds to the bleak outlook.
On the technical front, a rejection of the EMA200 and Fibonacci support cluster would reaffirm the bearish bias and open the door to lower lows towards 63.63, although prolonged weakness past it has a higher degree of difficulty.
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. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 17 Sep 2024 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 17 Sep 2024 https://www.iea.org/reports/oil-market-report-september-2024 | |
| Retrieved 17 Apr 2026 https://www.opec.org/opec_web/en/publications/338.htm |
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