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Fundamentals

During the Asian session on Monday (October 23), WTI crude oil fluctuated downward and is currently trading around 87.0 dollars per barrel. Last Friday, the scope of the Palestinian-Israeli conflict did not expand, and oil prices fell slightly. Oil prices rose as high as 89.7 on Friday, and then fell back in oscillation. Today, the Asian session opened as low as 86.6. From the current supply and demand side, there has not been much change, the inventory cuts continue, and the US is also accelerating preparations to replenish strategic oil reserves. On the supply side, the expectation is that OPEC+ will end production cuts early, but the reality is that production has been decreasing. At present, it is more about the geopolitical conflict between Palestine and Israel that affects the rapid and sharp fluctuation of oil prices. In the short term, the main line of trading is the development of the situation in the Middle East. If Israel turns to a ground offensive in Basha, the situation may gradually evolve into the same long-term as the Russian-Ukrainian conflict, and traders will gradually become numb, but only if the scope of participation in the war does not expand. If the oil-producing countries passively enter the war, oil prices do not rule out the possibility of quickly reaching $100. At present, the situation is still under control, we still maintain a wide range of corrections on oil prices, and investors need to be patient to buy low and sell high.

News: The US Department of Energy said on Thursday it expected to buy 6 million barrels of crude to replenish the Strategic Petroleum Reserve (SPR), delivering 3 million barrels each in December and January next year, while continuing its plan to replenish emergency reserves.  

Inventory: US crude oil inventories fell more than expected by 4.491 million barrels to 420 million barrels in the week ended October 13. Also, gasoline inventories fell by 2.37 million barrels to 223 million barrels. US oil demand picked up.  

Geographical: Israel has not yet begun a full-scale offensive, but humanitarian crises are frequent. The US intercepted three cruise missiles and multiple drones launched by the Houthis. At the same time,  the Chinese Embassy in Israel recommended that Chinese citizens return to China or leave China as soon as possible when commercial flights are still operating, as the regional situation is gradually complicated.  

Focus: There is no important data today. Traders should focus on the development of the situation in the Middle East.  

Technical Analysis

Oil prices retreated on Friday, with the highest at 89.7 and the lowest at 87.3, closing a bear candle with long upper and lower shadows. Since the beginning of October, oil prices have been running in the box below. Also, after touching the upper edge last Friday, it launched a pullback and is now approaching the support level of the lower edge. The lower support should focus on 86.3 below, and the upper should see the previous high around 89.7. The resistance on the upper edge is near 90.3.

It is recommended that investors mainly buy low and sell high. If the oil price retraces largely to 86.2, you can go long with small positions. The stop loss is set at 85.7, the first target to take profit is 88.7, where you can reduce your positions and move the stop loss to break even, and the second is 89.7. If the oil price surges to 90.0, you can go short with small positions. The stop loss is set at 90.5, the first target to take profit is 87.5, where you can reduce your positions and move the stop loss to break even, and the second is 86.2.

Trading Recommendations

Trading Direction: Long

Entry Price: 86.200

Target Price: 88.700

Stop Loss: 85.700

Support: 86.300/85.300

Resistance: 88.500/89.500