The US Dollar Basket (DXY), a widely followed indicator of USD performance, reached 107 this morning. The dollar weakened at the end of last week as concerns about another US government shutdown grew, eventually ending on Saturday when Congress decided to avert such an outcome. When the dust settled on Monday, yields and the currency regained lost territory and even soared higher. Michelle Bowman of the Fed conceded in a hawkish statement that it ‘it likely be necessary’ to raise rates further and keep them at a restrictive level for some time.
A rising dollar makes international purchases of oil more expensive, potentially decreasing the commodity’s price. The underlying picture of the oil market, on the other hand, implies that we may witness a rebound to previous highs. OPEC is anticipated to continue its existing output cuts of 2 million barrels per day (bpd), with Saudi Arabia and Russia cutting supply by 1 million bpd and 300,000 bpd, respectively.
Brent crude oil has fallen nearly 6% since the September peak, where it is looking for support. Prices finished just below the swing low of September 26th, allowing for additional selling. However, it looks like bulls may be identifying some value around the $90 mark in early trade on Tuesday, increasing prices.
The RSI is stuck at 50, and the MACD still indicates that momentum is to the downward. In terms of support, $89 is a stronger level of support if prices continue to fall, with $87 not far behind. The 38.2% Fibonacci retracement of the significant 2020-2022 advance above $91.42 seems to be resistance, as does a retest of the high at $95.60.
WTI offers a far more enticing setup for bulls, with market action reversing around a region previously explored and acknowledged as support. The last bullish pennant’s highest point suggests a level of support around $88.90, with prices probing the zone surrounding it twice earlier. With the Brent/WTI differential decreasing, it looks that WTI might lead an increase in oil prices if positive momentum continues.
Crude oil stocks in the United States have been declining since mid-August, albeit the rate of fall has slowed. Despite broad economic worries connected to tight financial circumstances, global oil consumption has remained resilient.
Despite the latest negative adjustment in Q2 GDP, the US economy continues to thrive, boosting oil consumption. API crude oil stock levels will be released later today, followed by EIA storage data and the OPEC meeting tomorrow.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.