{x} | Trading.live

Abstract: There are signs that the conflict between Palestine and Israel will be controlled, and the demand for crude oil may be weakening, which has prompted a sharp drop in oil prices in the near future.

Fundamentals

After a nearly 4% drop on Monday, WTI crude oil fell below US$80.50 (the previous low) on Tuesday, and fell 2.70% in the day, erasing all the gains after the attack on Israel on October 7.

Since the outbreak of the Palestinian-Israeli conflict on October 7, the geopolitical situation has become the focus of attention in the crude oil market in October. Judging from the price trend, the international crude oil price has not rebounded sharply due to the relatively limited influence of Palestine and Israel on the supply and demand of the crude oil market and the fact that the conflict between Palestine and Israel has not expanded with the efforts of all parties.

So far, the impact of the conflict between Palestine and Israel on crude oil prices is more focused on market sentiment, which has led to oil price fluctuations, but at present, the actual impact of the conflict on the supply and demand side of crude oil is still relatively small, which also leads to the rebound of crude oil prices still lacking support.

As the geopolitical situation in the Middle East continues to develop, the geographical premium of the oil market rose. Since the outbreak of the Palestinian-Israeli conflict, WTI crude oil once exceeded US$90.00 in intraday trading in late October, reversing the decline of oil prices in early October and then falling back. Considering that neither Palestine nor Israel is a major oil producer, market pricing has stabilized without further escalation.

However, under the influence of the broader geopolitical situation, small-scale conflicts between the U.S., Iran, Lebanon, and Syria are inevitable, and the geopolitical premium concerns brought about by them will not be eliminated soon. Oil prices may fall back after rebounding.

Technical Analysis

WTI crude oil is moving strongly higher in a narrow range early Wednesday, relying on the 100-day SMA, after falling nearly 6% over the past two days. Meanwhile, new bears are facing greater downside resistance in the area. The area has so far failed to break significantly, as the key factor influencing the trend was the triggering of stop-loss orders (US$80.50) and bear profit-taking.

On the other hand, fundamentals clashed with each other, with record monthly U.S. crude oil production adding to the pressure, coupled with an unexpected contraction in China's factory activity in October, while the market continued to closely monitor developments in the Middle East.

Investors also turn their attention to some key U.S. economic data today, including the October Manufacturing PMI, labor sector reports (October ADP Private Sector Employment and September JOLTS Job Openings), and the EIA Crude Oil Inventories report, which precedes the key event today - the Fed rate hike decision.

The new bears are now expected to lift the weekly close further above US$83.00 in an attempt to correct the strong bearish pattern in the 1D timeframe even further, creating some long traps in the week ahead and boosting the prospects for a longer-term decline.

Moreover, a clear break of the market above the integer threshold of US$80.50 will push the bears to attack the psychological support at US$80.00 and the negative signal of the 200-day SMA of US$78.10.

Finally, bearish sentiment is expected to remain in the near term, and it is clearly not wise to go short at this point in time, as investors will take advantage of the opportunity to build long positions at the end of the bearish trend. It is recommended to go short at the highs in the coming week, as it is bullish in the short term (as shown in the chart).

Trading Recommendations

Trading direction: Long

Entry price: 82.50

Target price: 87.00

Stop loss: 80.00

Deadline: 2023-11-15 23:55:00

Support: 81.01, 80.73, 80.00, 78.10

Resistance: 82.30, 82.78, 83.98, 84.31