Crude oil is bouncing off a significant support level on Friday, consolidating the recent losses it experienced earlier in the week. However, it is still on track to close the week in the red, impacted by news that Saudi Arabia—the world’s largest crude exporter—is abandoning its $100 price target and considering an increase in production. This week’s downturn may be viewed as an adjustment to the anticipated additional supply entering the market.
Meanwhile, the US Dollar Index (DXY), which measures the performance of the dollar against six other currencies, is consolidating ahead of the Personal Consumption Expenditures (PCE) Price Index data. The release of this index, which is the Federal Reserve’s preferred gauge of inflation, will provide further insights for the markets regarding the potential size of the November interest rate cut. Expect increased volatility if the PCE data exceeds expectations.
Oil Technical Analysis: Navigating the Noise
Crude oil traders are allowing prices to rebound on Friday after a sharp correction over the past two days. When removing the risk premiums tied to geopolitical tensions in places like Lebanon and Ukraine, supply levels are steady. With additional supply from Saudi Arabia set to enter the market, further declines appear likely.
Currently, the focus is on $71.46, which serves as the first resistance level on the upside following a brief false breakout. If positive momentum persists, a move toward $75.27 (the high from January 12) may be in store. The 55-day Simple Moving Average (SMA) at $73.83 could temper the rally as prices approach that level. If prices surpass $75.27, the next resistance level to watch is $76.24, coinciding with the 100-day SMA.
On the downside, $67.11—identified as a triple bottom during the summer of 2023—should provide support against further declines and potentially trigger a rebound. Below that, the next support level is at $64.38, marking the lows from March and May 2023.
