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Oil Leads As OPEC Boosts Demand Forecast

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Crude Oil Price Forecast Talking Points:

  • The ONE Thing: Demand dynamics and supply shocks help to keep oil supported. While volatility appears set for a higher average than 2017, which is not saying much as it had the lowest realized cross-asset volatility in multiple decades there appears to be no room for gold to test crude’s dominance of the market. Metals remain mixed as higher rates keep traders away from the non-yielding yellow metal while backwardation continues to support crude. Even base metals are losing their flavor on slowing demand growth in China.
  • Last week, President Trump ordered the reinstatement of Iran sanctions: While crude outsiders may see that as the key bullish driver, the demand dynamics remain in the driver seat as supply shocks may continue to arise and help take crude toward bullish targets of $77/bbl, which marks the 61.8% retracement of the 2014/2016 range.
  • OPEC raises their 2018 demand forecast helping to show the physical market may tighten further.
  • WTI Crude Oil Technical Analysis Strategy: New technical support will be firm at Tuesday’s low of $67.63/bbl. Selling above this level is an ego call that seeks to say when momentum will turn in favor of one’s preconceived notions that the market is “overbought.”
  • Access our recent Crude Oil Fundamental Forecast here

WTI crude oil is opening week in the green with frontmonth contracts of WTI & Brent trading at $70.95/bbl & $77.87/bbl respectively. Over the weekend, Saudi came out to calm markets by saying their capacity would easily make up anything “lost” by newly imposes Iranian sanctions on Trump’s exit from the Iran accord. However, the positive price action is being credited to OPEC’s recently released Monthly Oil Market Report where they lifted (again) their demand estimates.

Futures Positioning Insights From CFTC CoT

Last week’s CFTC Commitment of Traders report that came out before Trump announced he was leaving the Iranian Accord and imposing sanctions on OPEC’s third largest producer showed that investors have recently pared their bullish bets with Brent net longs cut by -22,009 contracts to 569,448 while WTI decreased some -7,439 contracts to 410,608.

CoT Data Shows Crude Bulls At 71% of 52-Week Range

Crude Oil Price Forecast: Oil Leads As OPEC Boosts Demand Forecast

Article Source: CoT: USD/CHF Bearish on Swiss Franc Position Changes, Technicals

Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2

Technical Analysis – WTI Crude Oil Stays In Bullish Standing > $67.56/BBL

Please add a description for the image.

Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT

Markets are said to take the stairs higher and the elevator lower. The chart above shows both dynamics as it captures the massive drop in 2014 that mirrored the 2008/2009 drop toward lower levels and the recent rise from the January 2016 low.

When a trend is as strong as we see in crude, it’s often best to sit back and ask, at what level of support would a break below change my bullish view?

On the prompt WTI contract, that would be the January high at $66.58 to the low last week’s low at $67.56. Absent a break below this zone, it’s hard to say a top is in as momentum tends to lead price in markets, and crude is no exception.

Recommended Reading: 4 Effective Trading Indicators Every Trader Should Know

More for You:

Are you looking for longer-term analysis on Crude Oil and other popular markets? Our DailyFX Forecasts for Q2 have a section for each primary currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a surplus of helpful trading tools, indicators, and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions.

Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities, and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

—Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as trading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell



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US Sanctions Against Iran May Spark 1970s-Style Oil Crisis Fears

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TALKING POINTS – Iran, Sanctions, CRUDE Oil, Trump, Emerging markets

  • US oil export sanctions against Iran will be enforced on November 4th
  • Net-importers in emerging markets likely to suffer from higher prices
  • 1970’s oil crisis, embargo may haunt markets as Trump buckles down

The Trump administration’s trade wars and economic nationalism have caused severe volatility for most of 2018. The White House also withdrew from the 2015 multilateral Iran nuclear deal – known as the Joint Comprehensive Plan of Action – in May, and has re-imposed sanctions. The most devastating will be an oil embargo that is scheduled to be take effect on November 4th.

In the 1970’s, the US imposed an oil embargo against Iran that led to a surge in prices. The jump in energy costs radically affected markets. The US – which at the time was coming on the heels of massive public spending programs– had its inflationary pressure skyrocket.

The administration’s public spending agenda, coupled with the sanctions against Iran, echo a dangerously similar narrative the world saw 39 years ago.

1979 OIL CRISIS

In 1979 – amid the turmoil of the Iranian Revolution – political radicals stormed the US Embassy and took 52 Americans hostage. In response, US President Jimmy Carter froze billions of dollars’ worth of Iranian assets in the United States and enforced an oil embargo.

The decrease in oil exports – adding to growing fears of further disruptions – caused prices to climb. Adjusted for inflation, the price per barrel stood at around $55 in 1978. In 1979, the cost skyrocketed to $97 and peaked at $122 in 1980. In 1981, the hostages were released and the price began to fall.

Oil Embargo

DailyFX Trade War Infographic

See our full interactive history of trade wars here.

Some economists and historians argue that “precautionary demand” was an influential contributing factor to the increased cost of oil. This same fear may be rearing its ugly ahead again today.

2018 OIL EMBARGO ON IRAN

After unilaterally pulling out of the nuclear deal – due to allegations that Iran was not cooperating with the International Atomic Agency – the Trump administration hit Tehran with two waves of sanctions. The first included a ban on any transactions involving the US Dollar, gold, precious metals, aluminum, steel, commercial passenger aircraft and coal. The White House has also banned imports of Iranian carpets and foodstuffs.

The second wave will be the oil embargo. Trump warned that anybody who conducted business in the Iranian market would face “severe consequences”. The ban requires that all importers have to immediately cut off their supply from Iran by November 4th. Any countries that violate the ban face the possibility of sanctions. The EU responded by pledging to protect European firms by activating a blocking statute established in 1996. It allows European businesses to operate under US sanctions without incurring any penalties.

The EU’s defiance to the US adds to the growing tension between allies amid the escalating trade wars. The sanctions also empower hardliners in the Iranian government. This makes the possibility of repairing relations and easing international tension much more difficult.

EFFECT ON MARKETS

If the US imposes sanctions or tariffs against the EU for conducting business with Iran, they will almost certainly retaliate. In that event, sentiment-linked assets are likely to suffer and anti-risk currencies like the Japanese Yen or Swiss Franc will probably rise.

Euro Falling on Trump’s Iran Sanctions Announcement

US Sanctions Against Iran May Spark 1970s-Style Oil Crisis Fears

Crude oil has reached a four-year high, with the Brent benchmark trading at around $84/barrel. Rising prices are damaging for net importers in emerging markets. If Trump digs his heels in and commits to limiting Iran’s oil exports, emerging markets are likely to suffer.

Indonesian Rupiah and South African Rand vs the Dollar and Rising Oil Prices

Indonesian Rupiah and South African Rand vs the Dollar and Rising Oil Prices

TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter



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GBP/USD Gaps Lower on Brexit Stall, Eyes CPI and Carney Speech

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Talking Points:

  • GBP gapped lower versus USD, responding to Theresa May’s rejecting of an exit deal
  • GBP/USD’s downside momentum continues dominant downtrend for majority of 2018
  • Key economic data and BOE Gov. Carney’s speech may further influence the British Pound

Find out what retail traders’ British Pound buy and sell decisions say about the coming price trend!

The British Pound fell against the US Dollar during weekend trading as Brexit negotiations between the United Kingdom and the European Union hit an impasse. UK Prime Minister Theresa May’s Brexit Secretary Dominic Raab and EU Chief Negotiation Michael Barnier were unable to reach an agreement on a draft treaty, leading PM May to label the deal a “non-starter”. Barnier later mentioned that some key issues remain open, including the Irish backstop.

GBP/USD 1-Hour Chart

GBP/USD Gaps Lower on Brexit Stall, Eyes CPI and Carney Speech

This is the latest in ongoing Brexit turmoil, and could possibly bode ill for the Sterling’s recent upside momentum. If a deal is not reached, the United Kingdom would exit the EU and be subject to World Trade Organization rules, potentially causing declines in GBP. Furthermore, longstanding political uncertainty and tensions regarding Brexit have caused the GBP to weaken for the majority of this year. Furthermore, an increasingly hawkish Federal Reserve and haven demand amidst EM contagion fears and trade wars have caused the greenback to strengthen, intensifying the currency pair’s bearish action since April 2018.

GBP/USD Daily Chart

GBP/USD Gaps Lower on Brexit Stall, Eyes CPI and Carney Speech

Looking ahead, this is a week of high economic activity for the British Pound. On Wednesday, the UK Statistics Office will release consumer inflation data for the month of September. In addition, Bank of England Governor Mark Carney is set to give a speech on Thursday, with forward guidance possibly dictating next moves for the Pound. However, ongoing Brexit negotiations will continue to take center stage and overshadow economic data’s influence on the Sterling. Developments upcoming summit of European Union leaders focusing on Brexit could cause volatility shocks to the currency pair.

GBP/USD Trading Resources

— Written by Megha Torpunuri, DailyFX Research Team



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Unsteady Risk Trends Increase Scrutiny on China, Italy and Brexit

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Market participants will return with caution this week. Following the rout in speculative assets from shares to emerging markets to Yen crosses, there is an understandable tension amongst investors. In this environment troubling news in trade wars, Chinese growth, Euro-area stability or any number of key themes can readily find traction.

New Zealand Dollar Forecast – New Zealand Dollar May Look Past CPI, Focus on Stocks, USD & Fed

Any signs that the Fed could remain hawkish despite the global stock selloff could reignite USD at the expense of NZD, this may overshadow gains on an upbeat local CPI data.

Japanese Yen Forecast – Speculation for Above-Neutral Fed Rate to Curb USD/JPY Weakness

Fresh developments coming out of the U.S. economy may curb the recent selloff in USD/JPY as Federal Reserve officials see a risk for above-neutral interest rates.

Oil Forecast – Oil Demand Forecasts Cut After Risk Rout Leads to Worst Week Since May

After trading to four year highs to open the month, Crude has come off the highs along with risk sentiment, but you crude appears to have fundamental support that could keep bulls confident.

British Pound Forecast – Heightened Risk Doesn’t Reward Position-Taking This Week

It may be uncomfortable but sitting on the fence is the best place to be ahead of next week’s Brexit updates and EU Summit

US dollar Forecast – US Dollar May Find Renewed Strength in FOMC Meeting Minutes

The US Dollar may find renewed strength after last week’s confounding drop as minutes from September’s FOMC meeting signal officials’ intent to press on with rate hikes

Gold Forecast – Gold Price Outlook Finally Impacted by Safe Haven Demand

Gold was the beneficiary of safe haven demand this week after the Dow lost over 1,300 points in just two days.

Australian Dollar Forecast – Australian Dollar Held Up Last Week, May Not Do So Again

The Australian Dollar held up quite well to the intensification of one or two factors which have stymied it this year. Don’t rely on that continuing

Chinese Yuan Forecast: Yuan May Extend Loss on China’s Q3 GDP, Eyes on PBOC for Reference

China’s weak economic growth could add more bearish momentum to the Yuan; at the same time, Chinese regulators may try to avoid extreme volatility.

Weekly Fundamental Forecast: Unsteady Risk Trends Increase Scrutiny on China, Italy and Brexit

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

See how retail traders are positioning in the majors using the IG Client Sentiment readings on the sentiment page.



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