Crude Oil Plunges into Bear Market with Worst Run on Record - US Market Open

MARKET DEVELOPMENT – CRUDE OIL IN BEAR MARKET

Crude Oil: The rout continues for oil prices, which is on course for its longest losing streak on record (oil declining for 10 consecutive sessions) with WTI dropping below $60 and Brent cracking $70. Brent spreads have moved deeper into contango territory as investors fear over a potentially over-supplied market. Much of this had stemmed from the Trump administration announcing oil waivers for 8 countries, which would allow for continued buying of Iranian crude. This also came at a time where the US, Russia and Saudi Arabia had been boosting oil to record levels. Given that crude is now in a bear market from the October peak, eyes will be on the JMMC meeting on Sunday, where there could be increased talk of a potential supply cut from Saudi Arabia and Russia.

USD: Last night saw the latest FOMC announcement, which gave little in the way of new information. The Fed are largely in a pre-set course which will see them raise rates at December, money markets pricing in an 80% probability of a hike. Recent volatility in financial markets had been dismissed by the Fed, who highlighted that the underlying US economy remains strong and as such, USD and US yields remain elevated.

EUR: The Euro is back down towards familiar support with the YTD low at 1.13 back in sight. In the meantime, 1.1340-50 is holding for now and as such, preventing another retest of the YTD low for the time being.

GBP: Oscillating news flow between Brexit deal optimism and cliff edge Brexit has continued to keep GBP trading in a choppy fashion, which in turn has seen much of the optimism, subsequently faded. The latest UK GDP data provided some support for the Pound with UK growth rising at the fastest pace since Q4 2016 at 0.6%.

DailyFX Economic Calendar: Friday, November 9, 2018 – North American Releases

DailyFX Webinar Calendar: Friday, November 9, 2018

IG Client Positioning Crude Oil Chart of the Day

Oil - US Crude: Retail trader data shows 82.6% of traders are net-long with the ratio of traders long to short at 4.73 to 1. In fact, traders have remained net-long since Oct 11 when Oil - US Crude traded near 7459.0; price has moved 17.1% lower since then. The number of traders net-long is 0.5% higher than yesterday and 26.6% higher from last week, while the number of traders net-short is 10.5% higher than yesterday and 6.4% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil - US Crude prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Oil - US Crude trading bias.

Four Things Traders are Reading

1. “Global Markets Refocus Attention on Trade Wars and Brexit” by Justin McQueen, Market Analyst
2. “S&P 500, Dow Jones Charts – Beware of Steep Decline Even if Worst is Over”byPaul Robinson , Market Analyst
3. “Gold Price Analysis: Key Support in Focus as Yuan Eyes Psychological Level”by Justin McQueen, Market Analyst
4. “Lackluster U. of Michigan Confidence Survey to Curb EUR/USD Losses” by David Song , Currency Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX