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Weekly Commodities Review - 13 October

Brent Crude - Daily

1D chart on Brent Crude (Source: OvalX)
Historical performance does not guarantee future profits

Technical analysis is slightly less useful on oil markets as they remain so heavily dependent on OPEC news, rather than on pure market flow, like FX and indices.

Nonetheless, it can prove useful to take a snapshot of the technical situation to help provide a general roadmap of expectations.

For this daily chart we have thrown up the Fibonacci retracement levels calculated from the late 2021 lows and the spike higher early in 2022 up above $135.

This created a 50 percent level around $100, which seemed to catch the initial retracement in early 2020, but which has given way in Q3 of 2022.

Concerns over the state of the global economy pulled price action down under the 61.8 percent level, but this has been recovered on the latest announcement of output cuts by OPEC+.

But due to the significant break under the $91 region the technical trend has now turned more negative, suggesting that future output cuts will be required to get prices back towards $100.

Saudi Arabia has already received a relatively stern response from the US on its announced cuts, making any further reduction in output increasingly costly politically.

The technical situation has turned weaker through Q3 2022. Required output cuts will become increasingly difficult in the months ahead, particularly as Europe prepares for a tough winter of energy shortages.

This raises concerns that oil prices may continue to drift lower through Q4 2022. This means moves up above $100 will be needed to make the outlook appear rosier.

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Please note that the presented content refers to the Oval group which contains two legal entities: Monecor (London) Limited authorised and regulated by the UK Financial Conduct Authority (FCA) with Financial Services register number 124721. Monecor (Europe) Limited authorised and licensed under the Cyprus Securities and Exchange Commission (‘CySEC’) with license number 096/08.