Crude Higher on Monday
Oil prices are rising on Monday, despite the latest OPEC+ output hike, as demand grows against the backdrop of a weaker USD and elevated Russi-Ukraine risks. A fresh drop in the US NFP data on Friday has seen Fed easing expectations rising near-term. The market is now pricing in a 90% likelihood of a cut this month with expectations for a further .5% of easing ahead of year end seen rising also. With downside USD risks growing, risk assets look poised to gain near-term.
OPEC+ Output Increase
Indeed, the rally in crude today comes despite OPEC+ announcing a further output increase to take effect next week. The group will pull back curbs for a sixth consecutive month, returning nearly 200k bpd to the market. However, the level is far below the increases we’ve seen in prior months and is seemingly being ignore by the market for now.
Russia-Ukraine Conflict
Ongoing, and seemingly escalating, conflict between Russia and Ukraine is also feeding into higher crude prices. Huge Russian drone strikes on Kyviv in recent days show that the war is far from over. Indeed, with peace talks stalled, the supply risks for crude remain a key price driver and oil prices look set to push higher while the conflict continues.
US Inflation
Looking ahead this week, traders will be watching the USD response to Thursday’s inflation data. If we see a fresh move lower in USD this should help drive crude prices higher near-term. However, if USD rebounds on the data (upside CPI beat), this could put fresh pressure on crude and broader risk assets.
Technical Views
CL
For now, crude prices remain below the 63.83 level and while that level acts as a cap, focus is on a fresh move lower and a test of the 57.42 level next. Topside, bulls need to get price back above 67.45 to turn focus towards a full recovery near-term. Momentum studies look mostly neutral for now.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.