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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.

Oil - Brent

82.34 Price
+0.540% 1D Chg, %
Long position overnight fee 0.0303%
Short position overnight fee -0.0522%
Overnight fee time 21:00 (UTC)
Spread 0.032

Oil - Crude

79.08 Price
+0.420% 1D Chg, %
Long position overnight fee 0.0510%
Short position overnight fee -0.0729%
Overnight fee time 21:00 (UTC)
Spread 0.030

Natural Gas

2.19 Price
+1.630% 1D Chg, %
Long position overnight fee -0.0621%
Short position overnight fee 0.0402%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Silver

29.14 Price
-0.370% 1D Chg, %
Long position overnight fee -0.0202%
Short position overnight fee 0.0120%
Overnight fee time 21:00 (UTC)
Spread 0.040

(Source: CNBC)

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

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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