Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Crude oil price halts three day selloff as US crude inventories contract

The price of oil halts a three-day selloff following a larger-than-expected decline in US inventories, and crude may stage a larger rebound over the coming days.

Source: Bloomberg

Data prints coming out of the US appear to be propping up the price of oil as the 7.056M decline in crude inventories instill an improved outlook for consumption, and it remains to be seen if the developments will influence the Organization of Petroleum Exporting Countries (OPEC) as the group plans to increase output by '0.1 mb/d for the month of September 2022.'

Source: TradingView

Evidence of robust demand may encourage OPEC boost production throughout the remainder of the year even as the most recent Monthly Oil Market Report (MOMR) warns that “volatility in futures markets remained fueled by expectations of lower GDP growth,” and the price of oil may face headwinds ahead of the next Ministerial Meeting on September 5 as the update reveals that ‘for 2022, world oil demand is foreseen to rise by 3.1 mb/d, a downward revision of 0.3 mb/d from last month’s estimate.’

Source: OPEC

As a result, ‘total oil demand is projected to average 100.03 mb/d’ compared to the 100.29 mb/d forecast from July, while ‘the 2023 forecast has remained the same as the last MOMR at 2.7 mb/d,’ with demand projected to reach 102.72 mb/d.

The forecasts suggest OPEC will continue to boost production as energy consumption is expected to pickup in 2023, but the signs of limited supply may keep the price of oil afloat as US output narrows for the first time in five-weeks.

A deeper look at the figures from the Energy Information Administration (EIA) show weekly field production narrowing to 12,100K in the week ending August 12 from 12,200K the week prior, and current market conditions may lead to a near-term rebound in the price of oil as indications of robust demand are met with signs of supply-side constraints.

With that said, the price of oil may stage a larger recovery over the coming days as it snaps the series of lower highs and lows carried over from the previous week, but rebound from the monthly low ($85.73) may turn out to be a near-term correction as crude fails to defend the February low ($86.55).

Crude oil price daily chart

Source: TradingView

Summary

  • The price of oil seems to be finding support ahead of the former-resistance zone around the October 2021 high ($85.41) as it snaps the series of lower highs and lows carried over from last week, with the close above $88.10 (23.6% expansion) raising the scope for a move towards the $90.60 (100% expansion) to $91.60 (100% expansion) region.
  • Next area of interest comes in around $93.50 (61.8% retracement) to $95.30 (23.6% expansion), with a break above the monthly high ($98.65) opening up the $100.20 (38.2% expansion) region.
  • However, the rebound from the monthly low ($85.73) may turn out to be a near-term correction as the 50-Day SMA ($101.69) reflects a negative slope, and lack of momentum to hold above $88.10 (23.6% expansion) may spur another run at the October 2021 high ($85.41).

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.