OIL PRICE FORECAST:
- Oil Struggled in the European Session as Market Participants Weighed the Prospects of the US-Venezuela Deal.
- OPEC Remains Silent Following Iran's Calls for an Oil Embargo.
- IG Client Sentiment Shows Traders are 68% Net Long on WTI. A Sign of Further Downside Potential Given the Contrarian View to Client Sentiment Adopted at DailyFX?
- To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.
Most Read: What is OPEC and What is Their Role in Global Markets?
Oil prices spiked higher yesterday following calls from Iran regarding an Oil embargo put market participants on alert. However, a lack of comment from OPEC countries coupled with a deal with Venezuela has seen Oil prices decline today on hope of a spike in production.
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US-VENEZUELA DEAL AND MIDDLE EAST DEVELOPMENTS
The US has agreed to an easing of sanctions on Venezuela with market participants hoping for n increase in Oil output. However, according to experts the lifting of sanctions will not quickly expand the country’s output but could boost profits by returning some foreign companies to its oilfields. Experts have also cited a lack of investment and deterioration of infrastructure as a key concern regarding the level of output that may be expected. According to sources, OPEC does not see any major impact from the easing of sanctions.
The deal with the US saw Venezuela receive broad waivers from the US with many experts not expecting as much leeway as was announced. This is a move by the US to counter high Oil prices globally as OPEC have maintained output cuts through to the end of 2023. This could help Venezuela as the country looks to recover following years of sanctions that have largely crippled the economy.
Drop in Venezuela Oil Production
Source: Refinitiv
Tensions in the Middle East continue to simmer but without any significant change we may not see any real impetus for Oil prices to move beyond the recent highs. As I have said for the majority of the wee, only the involvement of other Arab nations could have a material impact on Oil prices. With Iran being the most vocal at this stage, any developments around the Straight of Hormuz also needs to be monitored as this could have a major bearing on Oil prices.
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RISK EVENTS AHEAD
The majority of US data has already been released today but we do have a busy evening ahead of us. There are a host of Fed Speakers on the docket today with Fed Chair Powell expected to kick things off. It will be interesting to gleam any new insights from Fed policymakers on the recent spate of data from the US and any comments around the FOMC meetings in November and December likely to stoke some form of volatility.
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
From a technical perspective both WTI and Brent have ben printing higher highs and higher lows since the tension in the Middle East erupted. Looking at WTI and early price action today hinted at a potential retracement which appears to be running out of steam at the time of writing.
WTI has risen around $2 from the daily low of 85.50 with a daily candle close above the 88.30 mark could open up a move toward the recent highs. I do not think market participants have enough conviction to push on toward the 100.00 mark. However, given the many variables and surprises we have already seen in 2023 there is a chance that 100.00 a barrel could still come to fruition.
WTI Crude Oil Daily Chart – October 19, 2023
Source: TradingView
Key Levels to Keep an Eye On:
Support levels:
- 85.50
- 84.17
- 82.00
Resistance levels:
- 88.30
- 90.00
- 92.42
Brent Crude also had a slight selloff today but has recovered faster than WTI to trade marginally in the green for the day around the 90.50 mark. This could be key given yesterday we did record a daily candle close above the 90.00 mark and today's candle currently trading as a hammer candlestick also supporting further upside. The daily close today could prove key and should be monitored.
Brent Oil Daily Chart – October 19, 2023
Source: TradingView
IG CLIENT SENTIMENT
IG Client Sentiment data tells us that 68% of Traders are currently holding Long positions. Given the contrarian view adopted at DailyFX, is this a sign that Oil prices may continue to fall?
For a more in-depth look at WTI/Oil Client Sentiment Data and Tips on How to Use it, Download the Free Guide Below.
| Change in | Longs | Shorts | OI |
| Daily | 6% | -3% | 4% |
| Weekly | 32% | -34% | 8% |
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
