The Good Oil: Crude prices tumble on demand fears
By Kyle Rodda
10:48, 10 November 2023
Oil has tumbled as demand concerns build. We look at the drivers of oil prices and the key technical levels of WTI Crude.
Oil prices plunge on demand fears
A spate of soft US economic data raised fears of an imminent slowdown in global growth. US labour market data revealed a surprise uptick in the jobless rate: a sign economic activity is moderating. More pertinently for the oil price, ISM Manufacturing PMI plunged to approach levels historically consistent with a contraction in US growth. China also remains a concern, with crude prices coming under pressure following weak trade data earlier in the week.
(Source: Trading Economics)
Volatility recedes but remains elevated
While diminishing fears about the Israel-Hamas war have spurred a drop in implied volatility, it remains elevated and has bounced in response to global growth fears.
Speculation builds about OPEC+ intervention
Earlier in the week, Saudi Arabia and Russia flagged it intended to maintain output curbs despite supply-side risks stemming from the Israel-Hamas war. With oil subsequently dropping more than 6% to extend its recent fall to 20%, speculation has mounted about whether OPEC+ could cut production further to stabilise markets. The price of WTI was below $70 per barrel the last time OPEC+ announced meaningful output cuts in June.
Crude prices break several support levels
WTI Crude has broken several key technical levels as the commodity extends its short-term downtrend. Previous support at $80.50 and $77.00 could act as future resistance. The daily RSI is climbing out of oversold territory, indicating a possible reversal.
Past performance is not a reliable indicator of future results