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Summary: Crude oil prices experienced a rollercoaster week with sharp fluctuations before declining. As the war premium related to the Israeli–Palestinian conflict subsided, the market's attention shifted toward global demand.

Fundamentals

International crude oil prices witnessed a volatile pullback this week, with technical indicators once again showing weakness. WTI crude oil closed below the 100-day SMA for the first time since July.

Away from the war, opinions on global demand vary. US August consumption reached the highest level in four years, significantly revising weekly data at that time. However, China, the world's largest crude oil importer, saw its manufacturing sector contract again in October, and BP PLC reported oversupply in the global gasoline and diesel markets.

The further softening of WTI crude oil prices led to a loss of confidence among crude oil bulls, and the war premium has almost entirely evaporated as the market's focus gradually shifted to growth concerns and seasonal demand weakness.

Meanwhile, recent oil tanker tracking data suggests that Russia appears to be quietly increasing its crude oil exports, surpassing its committed target export volumes for the past few weeks.

Data from oil tanker tracking monitored by international media shows that Russia's offshore crude oil exports have consistently exceeded the target export volumes as part of the OPEC+ agreement in recent weeks. The observed export volumes in the past week were 360,000 barrels per day higher than the target export. Over the past four weeks, the average daily export volume exceeded this level by nearly 200,000 barrels per day.

Additionally, while core OPEC+ members Russia and Saudi Arabia had made efforts to control oil production and boost oil prices earlier, the US has once again become a thorn in their side as a marginal producer.

According to data released by the US Energy Information Administration (EIA) on Tuesday, US crude oil production reached a historic high in August. The latest data shows that US crude oil production in August reached 404.6 million barrels, with a daily average production of 13.05 million barrels, surpassing the record of 401.73 million barrels set by US drillers in July. Compared to the same period last year, US August total production increased by 33 million barrels. The US ships approximately 4 million barrels of crude oil overseas daily to meet gaps in the physical market. Despite reaching a historic high in August, US crude oil inventories are estimated to be just under 3 million barrels different from the year's start.

Technical Analysis

WTI crude oil has formed lower highs and lower lows within an hourly time frame, indicating a channel-like downward trend. The price has just rebounded from the channel's bottom support, potentially retesting the channel's top at $82.00.

Currently, the descending trend in crude oil prices aligns with the 100 SMA dynamic pivot point, adding strength to it as resistance. If this holds true, crude oil prices may resume the downtrend, first breaking below the swing low at $80.00.

Based on both fundamentals and technical patterns, the 100 SMA being below the 200 SMA suggests the path of least resistance is to the downside, meaning that selling is more likely to continue rather than reverse. However, a breakout above the channel's top could trigger a test of the next upside resistance at the 200 SMA or $84.00.

The stochastic oscillator has risen from oversold territory, indicating a potential continuation of the rebound and that bearish momentum might need to pause. Additionally, the oscillators have plenty of room to rise before reaching overbought territory, suggesting that bulls are beginning to show fatigue.

The RSI is also rising with room for a retest before reaching overbought territory. Therefore, with bullish pressure in play, prices may continue to follow. Nevertheless, given that the overall trend has started to shift towards a bearish direction, any price increases should be viewed as opportunities to primarily go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 82.00

Target Price: 76.96

Stop Loss: 84.00

Valid Until: 2023-11-16 23:55:00

Support: 80.00, 79.23, 77.62

Resistance: 82.58, 83.00, 83.90