Oil Price Trades in Monthly Opening Range as Ida Hits US Crude Data

  


Oil Price Talking Points

The price of oil appears to be stuck within the opening range for September amid mixed data prints coming out of the US economy, and crude may continue to consolidate over the remainder of the week as it struggles to push back above the 50-Day SMA ($69.93).

Oil Price Trades in Monthly Opening Range as Ida Hits US Crude Data

The price of oil is little changed following the 20th OPEC and non-OPEC Ministerial Meeting as the group plans to increase “overall production by 0.4 mb/d for the month of October 2021, and developments coming out of the US may influence crude prices over the remainder of the month as the Biden Administration argues that “OPEC+ must do more to support the recovery,”

Image of DailyFX Economic Calendar for US

Fresh figures from the Energy Information Administration (EIA) indicate a less robust recovery as US inventories contract 1.529M in the week ending September 3 versus forecasts for a 4.612M rise, and signs of slower-than-expected consumption may continue to drag on the price of oil as OPEC and its allies remain reluctant to push production towards pre-pandemic levels.

Image of EIA Weekly US Field Production of Crude Oil

Meanwhile, weekly field production tumbled to 10,000K from 11,500K during the same period amid the disruptions caused by Hurricane Ida, but the stagnant recovery in US output may keep the price of oil afloat as OPEC’s most recent Monthly Oil Market Report (MOMR) emphasizes that “total world oil demand is projected to surpass the 100 mb/d threshold in 2H22 and reach 99.9 mb/d on average for the whole of 2022.”

With that said, the decline from the July high ($76.98) may turn out to be a correction in the broader trend as the price of oildefends the May low ($61.56), but a downward trending channel appears to be taking shape in the second-half of 2021 as crude struggles to push back above the 50-Day SMA ($69.93).

Oil Price Daily Chart

Image of Oil price daily chart

Source: Trading View

  • Keep in mind, the price of oil traded to a fresh yearly high ($76.98) in July as both the 50-Day SMA ($69.93) and 200-Day SMA ($61.99) established a positive slope, and the broader outlook for crude remains constructive as the rally from earlier this year removed the threat of a double-top formation.
  • However, lack of momentum to test the 2018 high ($76.90) pushed the price of below the 50-Day SMA ($69.93), with the moving average now reflecting a negative slope as crude appears to be trading within a descending channel.
  • The decline from the July high ($76.98) may turn out to be a correction in the broader trend as the price of oil defends the May low ($61.56), but the string of failed attempts to break/close above the Fibonacci overlap around $70.40 (38.2% expansion) to $71.50 (38.2% expansion) may spur a move towards the $65.40 (23.6% expansion) region as it struggles to push above the 50-Day SMA ($69.93).
  • Next area of interest comes in around $62.70 (61.8% retracement) to $62.90 (78.6% expansion), with a move below the 200-Day SMA ($61.99) opening up the $60.30 (38.2% retracement) region.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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