The Good Oil: Crude prices rise after Fed meeting, geopolitical risks subside
By Kyle Rodda
13:08, 3 November 2023
Crude prices have rebounded following the Fed’s “dovish hold”. We review the key drivers and technical levels for WTI Oil.
Oil prices join post-Fed risk-on rally
The price of crude has rebounded after the US Federal Reserve signalled a potential end to its rate hiking cycle. Prices are being influenced by mixed macroeconomic fundamentals, with US ISM Manufacturing PMI revealing a precipitous drop in activity last month and indicating weaker growth in the future.
Volatility subsides, but geopolitical risks persist
Implied volatility in oil markets has subsided as the risks associated with the Israel-Hamas war ease at the margins. Israel has taken a more measured approach in its ground incursion into the Gaza Strip, diminishing concerns about a broader regional conflict.
US inventories lift less than expected
US Crude Inventories rose last week, according to the latest EIA report. However, the 0.8 million barrel increase was below the 1.5 million forecast, indicating continued tightness in the market. Excluding the Strategic Petroleum Reserve, which has drawn down considerably in the past two years, US oil reserves remain relatively low, pointing to heightened sensitivity to the risk of global supply shocks.
Crude prices pull back to support zone
After a further pullback this week, crude prices have turned around as buyers defended support just above $80 per barrel. Downside momentum is slowing, while a short-term downward sloping trendline has broken. A break below $80 could open a deeper pullback towards the 200-DMA. Technical resistance might be around $84.30.
Past performance is not a reliable indicator of future results