CRUDE OIL PRICE FORECAST: BEARISH
Crude oil costs idle amid US-China commerce struggle, Brexit uncertaintyReturning world slowdown worries may revive promoting stressOPEC could also be an afterthought as US output continues to balloon
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Crude oil costs have been idling in a uneven $50-62/bbl vary for the reason that center of the yr. The standstill seems to mirror a broad vary of uncertainties across the outlook for demand. Buyers are weighing whether or not a dovish pivot in worldwide financial coverage led by the Federal Reserve shall be sufficient to countervail a worldwide financial slowdown.
Main PMI survey suggests progress registered at near-standstill in October, extending a steep downturn from a peak in March 2018. The continued US-China commerce struggle and a handful of copycat conflicts – just like the current spat between South Korea and Japan – have accounted for a few of this. Uncertainty about the way in which ahead for Brexit appears to be one other contributing issue.
STEADY STREAM OF EVENT RISK TO DRIVE OIL PRICE VOLATILITY
A long-lasting development will in all probability battle to emerge on this house. However, a gradual barrage of headlines informing these twin narratives together with a potent dose of scheduled occasion danger promise volatility within the coming week. OPEC officers will meet forward of subsequent month’s assessment of the cartel-led output minimize scheme, the EIA will replace month-to-month provide and weekly stock figures, and Fed Chair Powell will converse.
On the financial knowledge entrance, readings on US shopper confidence, GDP and inflation appear price watching. Broadly talking, realized outcomes on US news-flow have cooled relative to baseline forecasts up to now two months, suggesting analysts’ fashions are overstating the financial system’s vigor. Extra of the identical may bitter traders’ temper simply as world equities hover close to document highs, tilting the danger/reward steadiness.
ECONOMIC GROWTH FEARS MAY RETURN JUST AS FED RATE CUTS PAUSE
In all, this appears to recommend the trail of least resistance leads decrease. Any saber-rattling from OPEC may fall on deaf ears as US output units one other document excessive at 12.eight million barrels per day. In the meantime, US inventories have rebounded to a four-month excessive in a transfer eerily parallel to the cooling in total financial knowledge cycle, warning that a tangibly worrying pivot within the enterprise cycle could be afoot.
Close to-term promoting stress could emerge to the extent that incoming statistical releases reinforce this hazard. For his half, Mr Powell will in all probability keep on message, signaling price cuts are on pause for now. That shall be met with groans of disappointment if current cautious optimism is already buckling beneath the burden of renewed world progress considerations.
— Written by Ilya Spivak, Sr. Foreign money Strategist for DailyFX.com
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