FundamentalOverview

In the latter partof last week, crude oil sold off without a clear catalyst. Some people havebeen citing the FT pieceabout Saudi Arabia being ready to abandon the $100 target but as Amena Bakr,senior research analyst at Energy Intelligence said, there was never a targetand such a high price wouldn’t even make sense since it would just hurt demand.

Some others havebeen citing the planned increase in production from December as the output hikeplanned for October has been delayed, but then again this has been known for quitesome time.

The rally in crudeoil stalled since the last USS&P Global Manufacturing PMI where the index fell further incontraction. We got a brief rally following the news of China going big on theeasing measures, but we couldn’t break above a key resistance level.

I suspect some of theweakness might be due to defensive positioning into the US ISM ManufacturingPMI tomorrow which is going to be a key release for the market. Central bankeasing generally leads the manufacturing cycle, so we can expect global growthto pick up.

All these reasons should bebullish for the market and support prices in the next months but it’s not yetclear in the data and might not be reflected for a couple of months. Watch thenew orders index as it’s a proxy for demand and should be the first to respondto a change in conditions.

As a reminder, thepositioning in crude oil is at record lows and the sentiment is very bearish.These factors can generally offer great contrarian opportunities when we get toan inflection point in the fundamentals.

Crude OilTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that crude oil got smacked back down from the key 71.67 resistance. The buyers couldn’t sustain abreakout and eventually the sellers prevailed erasing most of the rally fromthe lows.

If the price falls further,the buyers will likely step in around the 63-65 support zone to position for arally into the 90 handle. The sellers, on the other hand, will want to see theprice breaking lower to increase the bearish bets into the 50 handle next.

Crude Oil Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we cansee that the price fell below the 68.50 support in the latter part of last weekbut eventually managed to erase the losses and rise back above it. The buyerswill likely step in around these levels to position for a rally back into the71.67 resistance, while the sellers will look for a drop back below the supportzone to position for a fall into the 63-65 support.

Crude Oil TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee that we have been printing a series of higher highs and higher lows on thistimeframe as the bullish momentum picked up.

We have a minor upward trendlinedefining the current momentum where the buyers will likely keep on leaning ontoto position for new highs. The sellers, on the other hand, will want to see theprice breaking lower to position for new lows. The red lines define the average daily range for today.

UpcomingCatalysts

Today we have Fed Chair Powell speaking. Tomorrow, we get the US ISMManufacturing PMI and the US Job Openings data. On Wednesday, we have the USADP report. On Thursday, we get the latest US Jobless Claims figures and the USISM Services PMI. Finally, on Friday, we conclude the week with the US NFPreport.