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Fundamentals

During the Asian session on Friday (October 13th), WTI crude oil fluctuated downwards, and it is currently trading near US$82.4/barrel; Yesterday, the crude oil price fluctuated greatly, and it bottomed out during the Asian session. Then, after the crude oil inventory data in Europe and the U.S. showed there was bargain hunting, the oil price went down all the way, giving back all the gains during the day, with the fluctuation reaching US$2. The recent decline in oil prices in the market is still due to replenishment, but basically, replenishment has ended. With the rising number of casualties in the Palestinian-Israeli war, the risk of spillover of the Palestinian-Israeli conflict has increased. The possibility of oil-producing countries' involvement and the situation getting out of control is not ruled out. Even if there is no Palestinian-Israeli conflict, the support below the oil price is still very strong. Although the U.S. EIA inventory data increased significantly beyond expectations yesterday, there is no incentive to push the price down further, which shows that the current bearish strength in the market is powerful. After all, Saudi Arabia and Russia reiterated that they would cut production by the end of the year, and even longer. As investors, they should be afraid of risks and remain unchanged about the current oil price fundamentals. Last night, IEA and OPEC announced monthly reports in October, which were optimistic about the overall demand for crude oil in 2023, and the corresponding trading strategy is still to go long at the pullbacks.

Data: U.S. September non-seasonally adjusted CPI rose 3.7% year-on-year, with an expected value of 3.6% and a previous value of 3.7%; September core CPI rose 4.1% year-on-year, with a previous value of 4.3%; with a month-on-month increase of 0.3%.

Information: IEA monthly report: global crude oil inventories fell to the lowest level since 2017. It is globally observed that oil inventories decreased by 63.9 million barrels in August, mainly due to the decrease in crude oil inventories. OPEC+ voluntary production reduction policy will keep the market in a state of insufficient supply in the fourth quarter, but if additional production reduction measures are canceled in January, the balance between supply and demand may turn into a surplus.

Inventory: EIA weekly data shows that the EIA crude oil inventory in the U.S. was 10.176 million barrels in the week of October 6, with an expected value of 492,000 barrels and a previous value of -2.224 million barrels. Cushing crude oil inventory in Oklahoma was -319,000 barrels, with a previous value of 132,000 barrels. The Strategic Petroleum Reserve (SPR) inventory decreased by 0.0% to 351.3 million barrels. EIA gasoline inventory was -1.313 million barrels, with an expected value of -800,000 barrels and a previous value of 6.481 million barrels. In the week of October 6, the inventory of EIA refined oil in the U.S. was -1.837 million barrels, with an expected value of -802,000 barrels and a previous value of -1.269 million barrels.

Output: The demand data of EIA crude oil production in the week of October 6 in the U.S. was 18,075,300 barrels/day, and the previous value was 19,433,000 barrels/day. The average supply of crude oil products in the U.S. was 19.969 million barrels/day, an increase of 0.09% over the same period last year.

Focus: the initial value of the U.S. consumer confidence index in October.

Technical Analysis

U.S. crude oil prices were full of twists and turns yesterday. After it bottomed out during the Asian session, it rebounded to the highest level of 83.9, which was completely in line with our expected high point. Later, it fell sharply during the European and U.S. sessions, completely giving back the gains in the day. Approaching the close, it rebounded slightly, barely recording a Doji Star. Yesterday, we emphasized that it is recommended to remain range trading and treat it as fluctuation and that you can try to go short with small positions at 84, as it fully realized the US$2 profit. Technically, the oil price rebounded after hitting the lower rail. The reversal signal of such a Doji Star is obvious, and the MACD is developing a gold cross, with a high probability of short-term rise.

Trading strategy: It is recommended to buy low and sell high. If the oil price drops sharply to 80.5, you can try to go long with small positions, with a stop loss of 80.0 and the first target of take profit of 83.5. If you want to cut your positions and break even, the second target of take profit will be 85.2.

Trading Recommendations

Trading direction: Long

Entry price: 81.000

Target price: 83.500

Stop loss: 80.500

Support: 80.600, 77.600

Resistance: 83.500, 85.200