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Summary: International crude oil futures settled sharply lower on Thursday, with December WTI crude futures settling down $3.76, a 4.9% decrease, at $72.9 per barrel. Brent crude futures settled down $3.76, a 4.63% decline, at $77.42 per barrel.

Fundamentals

WTI crude oil plummeted on Thursday to its lowest level since July 10, as the decline accelerated due to increased inventories and breaking below critical technical support levels.

WTI crude briefly approached the $72 per barrel mark on Thursday, following a report on Wednesday indicating a rise in US crude inventories and a breach of the 200-day SMA. Simultaneously, Brent crude prices dipped below $77.00 per barrel, driven by algorithmic selling after falling below $80.00.

"Algorithm-driven" refers to the settlement of most commodity trades before the end of the trading day. The fair value of long and short positions on this trading day, calculated by algorithms, led to selling as their fair value was lower than the current price.

The recent drop in oil prices may be in sync with previous rounds of accelerated selling, creating a vicious cycle. In the absence of significant short-term bearish factors on the supply and demand side, the continuous breaking and falling of oil prices under the dual negative impact of increased supply and dim demand prospects cause distress (stampede events).

Setting aside the disturbances to oil prices caused by technical factors, we tend to believe that the crucial trend of oil prices in the next 4-6 weeks depends on the compliance of OPEC+ production cuts. If OPEC+ (especially Saudi Arabia) fails to fulfill the promised production cuts made in early September, oil prices will return to macroeconomic fundamentals. Instead, if it complies with production cuts during November and December, oil prices will continue to be influenced by supply considerations.

Technical Analysis

WTI crude oil experienced a significant decline this week, with a drop of around 4.9% yesterday, reaching the lowest point in four months, marking the fourth consecutive week of decline.

Despite OPEC+ and the International Energy Agency (IEA) predicting supply tightness in the fourth quarter, disappointing global economic data and a substantial increase in US crude inventories, coupled with ongoing record production levels, intensified the following pessimistic sentiment.

From a technical analysis perspective, earlier this week, WTI crude oil prices failed to recover the psychological level of $80.00, solidifying the bearish sentiment. We currently anticipate WTI crude oil prices to fall to the 161.8% Fibonacci retracement level of $95.50-$91.07, with a target of $68.85. Meanwhile, the range of $63.67-$66.94 is expected to provide significant support, potentially triggering a reversal.

Overall, WTI crude oil continues to be in a long-term range-bound pattern, oscillating in the range of $63.00-$96.00. In terms of trading, the strategy is focused on selling high and buying low.

Trading Recommendations

Trading Direction: Short

Entry Price: 74.50

Target Price: 70.19

Stop Loss: 77.30

Valid Until: 2023-12-01 23:55:00

Support: 72.33, 70.24, 66.98

Resistance: 74.95, 76.75, 79.86