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Fundamentals

In Wednesday's (October 11th) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at $81.6/bbl. Yesterday, WTI stopped the oscillation in the past days and plunged from 85.2 by 3 dollars. On the one hand, the Palestinian-Israeli conflict is not likely to expand to the Middle East core oil-producing countries, and the corresponding sentiment to go long faded, resulting in a decline in oil prices. On the other hand, the accumulation of stocks (other than inventory) is growing. Furthermore, Russian President Vladimir Putin said on Wednesday that if there are no OPEC+(production cuts), oil prices may now have fallen to less than $50/bbl. It is also understood to be a supply distortion, which is an unhealthy rise. Then, the bearish sentiment is boosted, and WTI crude oil is expected to decline further. Investors should focus on the support near 80.6 (the low in October).

Data: U.S. PPI rose 2.2% YoY in September, greatly exceeding expectations of 1.6%, and it is the third consecutive month for the PPI to grow unexpectedly. Besides, the U.S. PPI rebounded sharply from August's 1.6% YoY, the largest YoY increase since April. In addition, PPI rose 0.5% MoM, also exceeding expectations of 0.3%. Then, the U.S. core PPI rose 2.7% YoY in September, compared with expectations of 2.3% and a sharp rebound from August's 2.2%. The core PPI grew by 0.3% MoM, compared with expectations of a 0.2% rise.

Stocks: API data demonstrated that U.S. crude oil inventories jumped 12.94 million barrels, far more than the expected 1.3 million barrels, and the previous number was a reduction of 42 million barrels.

Focus: CPI data and EIA inventory data.

Technical Analysis

WTI crude oil plunged from high yesterday, and depreciated significantly after reaching 85.2 in the Asian session. In the European and U.S. sessions, WTI crude oil once declined to 81.8 by over 3 dollars, closing the chart with a big bearish candle, indicating a clear weak pattern. However, a double-bottom is expected to appear. Investors should focus on the support at last week's low (80.6), and WTI may move further to the previous low at 77.6 if it falls below the support. Nonetheless, MACD is below the 0-axis, and the sentiment has been released extremely. Therefore, fundamentals are needed for WTI to plummet further. The early end of production cuts may reflect a sharp decline in demand, but this will not happen in the near term. Currently, WTI crude oil may keep oscillating in the range, and investors should buy low and sell high according to the trend.

Trading recommendations: Buy low and sell high. If WTI crude oil depreciates to 80.5, investors could go long with small positions and set the stop-loss at 83.5. To take profits, the first target will be at 83.5, where they can move the stop-loss to breakeven, and the second target should be set at 85.2. Comparingly, if WTI crude oil rebounds to 84.0, investors could go short with small positions and set the stop-loss at 84.5. To take profits, the first target will be at 83.0, and the second target should be set at 82.0.

Trading Recommendations

Trading direction: Long

Entry price: 80.500

Target price: 83.500

Stop loss: 80.000

Support: 80.600/77.600

Resistance: 83.500/85.200