WTI Crude Oil (October)

Yesterday’s close: Settled at 69.20, down 1.14

The Crude Oil sell-off continued yesterday as weak U.S. economic data drove risk-off sentiment across asset classes.

WTI has bounced about 1% as of this writing on another report that OPEC+ members are close to an agreement on delaying production increases. According to Bloomberg, the group will not proceed with the scheduled 180,000 bbl/day production increase planned for October. On Monday, reports surfaced stating the opposite and that the group was in agreement to go ahead with production hikes. It is being reported today that the group has flip-flopped after poor U.S. and Chinese economic data.

We continue to advise caution regarding the newsflow surrounding OPEC+ plans. Remember, nothing is set in stone unless it comes from the group itself, but poor newsflow and shaky sources are commonplace when it comes to OPEC+ coverage.

Our opinion on the matter is as follows: OPEC leadership (Saudi Arabia), post-2020, has proven itself a staunch and willing supporter of the market. And, while they do not “govern based on price,” there seems to be an invisible line in the sand at $70 (Brent). At current demand levels, going ahead with production cuts would pressure markets even further, with some banks forecasting lows around $50 in 2025 (Citi Group). The retraction of Libyan barrels from the market (500,000 bbl/day) has done little to buoy pricing. This is likely a surprise to OPEC leadership and clearly signals the extent of weakness in demand. Also, it should be noted that spare capacity has, and will always be the group’s (Saudi Arabia’s) number one political bargaining chip. Being an election year in the States, where one candidate has deemed himself “The Tariff Man,” and both candidates speak on inflation, these chips have considerably more value. In our opinion, it is likely Saudi Arabia pushes for market support and works to delay production increases eventually, but the timing and cadence remain in question.

Weekly EIA inventory data is due at 10:00 am CT, and the screenshot above displays expectations. Keep an eye on the U.S. economic data, either supporting or weighing on the risk landscape.

Price action in WTI futures are more or less sideways overnight, and only seeing little buoancy to the newsflow referenced. We have rare major four-star support at 67.98-68.61, and we would have expected a better response technically and fundamentally. It could be that the market is waiting on the EIA data to react. Our momentum indicator aligns with previous support and comes in at our Pivot and point of balance; continued price action above this level at…

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