Crude Holding at Support

Crude prices are looking a little more buoyant today following heavy selling over last week. Crude futures were seen sliding from the 77.64 level down to support at 67.45 where they are stalled for now. News of an incoming storm in the US Gulf Coast is providing some upside pressure for prices on expected supply disruption. With the Gulf Coast area accounting for around 60% of US refining capacity, extreme weather episodes typically see higher prices in oil. Current, the weather system being monitored is expected to turn into a hurricane by Wednesday before hitting the north-western Gulf Coast region.

Potential Supply Disruptions

Expectations of potential supply disruption are adding to support for oil on the back of last week’s OPEC+ announcement. The cartel and its allies announced that it will delay a planned increase in output of 200k barrels per day for October by two months. The move comes amidst a fresh fall in oil prices which OPEC+ keen not to drive selling any deeper. Weaker demand out of China over recent months has become a major headwind for oil prices. With the US jobs market trending lower also, traders are sensing potential US recession risks on the horizon, also feeding into bearish sentiment for crude.

US Inflation in Focus

Looking ahead this week, crude prices might find further support if we see a fresh downturn in USD in response to the latest inflation reading. If Wednesday’s CPI reading falls below forecasts, this should amplify near-term Fed easing expectations, sending USD down again, creating support for crude and the broader commodities space.

Technical Views

Crude

The sell off in crude has seen the market breaking down below the 72.61 level and below the bear channel lows. Price is now testing the 67.45 level support with risks of a further break towards 63.83. Near-term, bulls need to get back above the 72.61 level to alleviate bearishness, putting focus on 77.64 as the next bull objective.