- WTI posts slight losses to pare first-in-three weekly gain.
- Economic recovery hopes battle China worries, geopolitical headlines trouble oil traders.
- The DXY bounce adds to the upside filters, but record US exports suggest an increase in energy demand.
- Risk catalysts are key to near-term guidance, with US Core PCE inflation also being considered.
Crude WTI Oil prices extend the previous day’s pullback from a fortnight high while printing slight losses around $88.00 in Friday’s Asian session. In doing so, black gold breaks the uptrend of the previous three days while consolidating the first weekly gain in three.
Although record US oil exports and a firming US Gross domestic product (GDP) tamed recession fears on Thursday, as concerns over China’s economic health and cautious market sentiment have weighed on commodity prices lately. Also, recent headlines suggesting that Russia was not preparing to use nuclear weapons in the war with Ukraine seemed to have challenged oil buyers.
Gross domestic product (GDP) grew 2.6% annualized, more than expected, in the third quarter (Q3). It’s also worth noting, however, that details suggesting a fifth consecutive decline in private consumption defied Fed hawks as they showed policymakers are gradually closing in on the target of slowing private domestic demand.
“The data showed record exports of U.S. crude, an encouraging sign for demand. Speculation that central banks could be nearing the end of rate hike cycles added support, after the European Central Bank lifted rates by 75 basis points (bps),” Reuters said.
The West’s efforts to jointly cap the price of Russian energy, which in turn escalates political tension between Moscow and the West, also suggests further difficulties for WTI bears.
On the other hand, China’s zero covid policy and mixed growth, as well as recent sharp rate hikes by major central banks, are challenging buyers of black gold. In the same vein, the latest talks between Saudi Arabia and Pakistani and French diplomats may signal more results.
Going forward, oil traders may keep their eyes on risk catalysts for further momentum. The Core PCE price index for September will also be important, and is expected to come in at 5.2% vs. 4.9% previously. That said, a firmer impression of the Fed’s preferred inflation gauge could bolster yields and Fed hawkish bets, which in turn will be supportive for the Oil Bears.
Thursday’s Doji challenges WTI buyers, but a convergence of 21-DMA and 50-DMA challenge Oil sellers around $86.00.