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US Crude Oil Price Dips as US-Saudi Tensions over Khashoggi Ease

US Crude Oil Price Dips as US-Saudi Tensions over Khashoggi Ease

2018-10-16 10:00:00
Martin Essex, MSTA, Analyst
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Crude oil price, news and analysis:

  • US-Saudi tensions have eased after US President Donald Trump said “rogue killers” may have been responsible for the death of Washington Post journalist Jamal Khashoggi.
  • US Secretary of State Mike Pompeo is to meet Saudi King Salman.
  • Together, these signs of a rapprochement have contributed to a further easing of crude oil prices.

Crude oil price slips

The price of US crude oil has eased back to the $71 per barrel mark after only a brief rally following the losses that took it from a high near $77 on October 3. Saudi critic Jamal Khashoggi disappeared after entering the Saudi consulate in Istanbul two weeks ago and Turkish officials have said they believe he was murdered there.

His disappearance has heightened tensions between Riyadh and the US, where Khashoggi was a resident, but the crude oil price largely ignored the news and is now falling again, suggesting continued underlying weakness following the advance that began in mid-August but petered out earlier this month.

US Crude Oil Price Chart, Daily Timeframe (June 4 – October 16, 2018)

Latest US crude oil price chart.

Chart by IG

The latest dip in crude oil prices after such a limited rally on the news of Khashoggi’s disappearance suggests they are reacting more to rising US stockpiles than to geopolitics or falling Iranian oil exports ahead of US sanctions against Teheran next month.

Technically, prices remain in a downward-sloping channel and retail trader sentiment data are also sending a bearish signal. They show that 65.5% of traders are net-long, with the ratio of traders long to short at 1.9 to 1. The number of traders net-long is 18.8% higher than yesterday and 50.6% higher from last week, while the number of traders net-short is 8.6% lower than yesterday and 40.5% lower from last week.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger bearish contrarian trading bias.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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