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WTI bulls move in a corrective structure

  • WTI tries to recover despite hardline rhetoric from Fed officials.
  • Analysts point out that the risks derived from the structural problems of supply are still present.

West Texas Intermediate Crude Oil it was up 3.4% at 78.86 bbl in afternoon trading during the American session. The energy sector has been somewhat relieved by a slightly softer US dollar on Tuesday, which pulled back from its 20-year highs.

In addition, oil producers suspended part of the production of the platforms in the Gulf of Mexico threatened by the proximity of Hurricane Ian. However, the DXY, an index that measures the dollar against a basket of currencies, has tried to recover in the American session thanks to the firmness of the spokesmen of the Federal Reserve. The index has traded between a low of 113,332 and 114,472 so far on the day and is currently trading back towards daily highs.

St. Louis Fed President James Bullard and Chicago Fed President Charles Evan advocated further interest rate hikes even at the risk of slowing economic growth, while Bank of America President Minneapolis Federal Reserve Chairman Neel Kashkari said in a live interview with the WSJ on Tuesday that central bankers are united in their determination to do what is necessary to bring down inflation, and financial markets understand that. “There is a lot of tightening going on,” Kashkari said.

In general, the tightening of monetary policy leads to lower demand for crude oil and fuel products and has been partly to blame for the decline in Brent and WTI, which have recently reached their lowest levels since January. The volatility of oil prices has led to speculation that OPEC+ may be forced to cut production when it meets next week to set monthly quotas.

Risks from structural supply issues remain, and the previously anticipated Iranian offer, which eroded supply risk premiums, now looks less likely. For the time being, in the current risky macro environment, these supply concerns appear to be largely ignored, while demand expectations are at an all-time low,” argue analysts at TD Securities. “It will be These market expectations need to be readjusted to lift crude oil prices out of their current slump.” In this regard, attention is shifting to possible OPEC cuts, as the cartel has proven nimble in its support of the global oil market. ”.

“The fall in prices increases the pressure on OPEC+: there are already calls in the market for further production cuts of up to 1 million barrels per day,” Commerzbank said in a note regarding OPEC.

On the other hand, the first hurricane of the season, Ian, in the producing areas of the Gulf of Mexico is affecting supply. Earlier in the week, Reuters had reported that BP and Chevron were shutting down some Ian rigs approaching Florida’s west coast. The storm is the first this year to disrupt oil and gas production in the Gulf of Mexico, which accounts for about 15% of the country’s crude oil and 5% of dry natural gas production.”

Meanwhile, the European Union is struggling to reach an agreement to cap Russian oil prices, with countries such as Cyprus and Hungary expressing opposition. “A deal now looks unlikely despite earlier expectations that it could materialize this week,” the ANZ bank reported.

Overall, analysts at TD Securities explained that “persistent demand concerns have dampened sentiment in a low-liquidity environment, and declining global risk has further fueled the recent deterioration in sentiment.” Crucially, the weakness may have been exaggerated in the immediate term, as physical demand indicators have not declined at such a rapid rate.”

“At the same time,” the analysts continued, “high-frequency data on US demand from the EIA, which has been extremely weak, has come under increasing scrutiny due to large adjustment factors and the inconsistency with mobility and flight data.Furthermore, going into winter, demand could improve marginally relative to the weakness being priced in, as Chinese run rates could increase to meet fuel export quotas, while the reopening and the improvement of mobility, together with the possible winter substitution of gas for oil, could offer support.

WTI H4 H&S

As illustrated, price is based on the lows of $76.23 and could be in the process of reasserting the right shoulder of an inverse head and shoulders, a bullish pattern that could lead to a significant break below the recent highs of $80.29. in the coming days.

US WTI OIL

Overview
last price today 78.46
today daily change 2.31
Today’s daily variation in % 3.03
Daily opening today 76.15
Trends
daily SMA20 85.14
daily SMA50 89.73
daily SMA100 99.02
SMA200 Journal 96.48
levels
Previous daily high 80.13
Previous Daily Low 76.08
Previous Weekly High 86.54
Previous Weekly Low 78.01
Previous Monthly High 97.68
Previous Monthly Low 85.39
Daily Fibonacci 38.2% 77.63
Daily Fibonacci of 61.8% 78.58
Daily Pivot Point S1 74.78
Daily Pivot Point S2 73.4
Daily Pivot Point S3 70.73
Daily Pivot Point R1 78.82
Daily Pivot Point R2 81.5
Daily Pivot Point R3 82.87

Source: Fx Street

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