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Fundamentals

During Thursday's (November 2nd) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at 80.6 dollars/bbl. Yesterday, the Federal Reserve suspended interest rate hikes as expected, and the dollar weakened. Meanwhile, Powell said that the Fed did not consider a rate cut. He emphasized that a rate cut was not discussed at all, and the purpose of the rate hike resolution was a suspension. Thus, the December rate hike will be traded. The crude oil inventories yesterday fluctuated little, and the oil price ascended and descended. The appreciation in oil prices was due to the Houthis joining the Israeli-Palestinian war, once pushing the oil price to its highest level at 83. Then, it plunged quickly, because the U.S. data was lower than expected, which further increased the investor's concern about the economy. Yesterday, we emphasized that going long at 80 will show a better profit and loss ratio and the space above can be extended to 82 and 83. Therefore, aggressive investors should catch more profits. But for us, this is not enough because WTI failed to reach the expected 80. Back to the fundamentals, after yesterday's decline, the bearish momentum has been completely released, boosting the possibility of today's rebound.  Inventory: As of the week of October 27th, the EIA crude oil stocks were 773,000 barrels compared to an expected 1.261 million barrels, and the previous number was 1.372 million barrels. The crude oil stocks in Cushing, Oklahoma were 272,000 barrels compared to a previous number of 213,000 barrels. Strategic Petroleum Reserve (SPR) stocks were unchanged at 351.3 million barrels. About Gasoline, the stocks were 65,000 barrels compared to an expectation of -803,000 barrels, with a previous number of 156,000 barrels. Refined oil inventories were -792,000 barrels, the expected number was -1.54 million barrels, while the previous number was -1.686 million barrels. U.S. total EIA motor gasoline production implied demand data for the week to October 27 9,531,100 bpd, compared with 9,695,900 bpd previously.

Geopolitical News: Houthi spokesman Yahya Sarea said in a statement on the Houthi's Almasirah channel that the Houthis used a "large number" of ballistic missiles and drones to strike Israel on the same day. This is also since the current Israeli-Palestinian war, the first armed organization formally claimed the attack on Israel, while the other Middle East neighboring countries are still talking without action.

Today's focus: U.S. Initial Jobless Claims, Factory Goods Orders in September, and most importantly, the Nonfarm Payrolls to be released tomorrow.

Technical Analysis

Yesterday, WTI crude oil declined for the third consecutive day, arriving at 83.1 and then plummeting to 80.1, closing the daily chart with a long-upper-shadow. After touching 80.1, WTI crude oil rebounded slightly in the Asian session today, and the bottom became stronger after yesterday's decline. Also, the bearish momentum faded tremendously. Now, WTI crude oil is under a trend to form a double bottom pattern, and a rebound is ready. Thus, investors should consider the situation at 83, as WTI failed twice to cross above it during the week. If WTI climbs above this area, it will further reach 85.5. However, the market is now trading a weakening supply/demand, and it will not turn significantly until an opportunity, or a surge in risk-aversion sentiment, emerges. Thus, investors should not expect a huge rebound, and stop being greedy. Instead, try to protect the profits, as WTI will be difficult to cross over 83.5.  

Today's trading recommendations: Buy at lows. If WTI retraced back to 80.6, try to go long with small positions and set the stop-loss at 80.1. To take profits, the first target will be at 83.5, where investors can reduce the position size and move the stop-loss to breakeven, and put the second target at 85.5. If WTI plummets to 79.5 again, investors should enter and go long, and stop loss by 0.5 dollars. The target to take profits is the same as the first target above.  

Trading Recommendations

Trading direction: Long

Entry price: 80.600

Target price: 83.500

Stop loss: 80.100

Support: 80.100/78.300

Resistance: 81.500/83.500