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Fundamentals

During Thursday's (October 19th) Asian session, WTI crude oil surged upward, and it is currently trading near $87.1/bbl. The EIA weekly report overnight showed that the U.S. crude oil and refined products were de-stocking, and oil prices rebounded after the data release, but fell from highs later, leaving a long upper shadow. Currently, the focus of the market is still on the progress of the Palestinian-Israeli conflict. In the European session, the Iranian foreign minister called for the implementation of an oil embargo on Israel stirring up tensions in the market. Although Israel's oil accounted for a very low global proportion, tensions and nervousness may push up the oil prices further. Besides, as Israel provided evidence to prove it did not bomb Gaza hospitals, the oil prices surged higher to 88.5 and then plunged sharply to 86.2. It verified the recent big fluctuations in oil prices but was also in line with our expectations. We emphasized yesterday that investors should go short at 88.3, and WTI crude oil offered 2 dollars as target profits. The approaching oscillations will not change much, as the great oscillation will be the main trend under the influence of geopolitical factors. Then, investors need to be patient and wait for the opportunity to trade and stop chasing the trend!

News: Iran's foreign minister called on Muslim countries to immediately and fully boycott Israel. He demanded to impose an oil embargo on Israel after a deadly explosion at a hospital in Gaza, which triggered the risk of a further escalation of the Middle East conflict.

Data: the EIA reported that commercial crude oil inventories (excluding the SPR) fell by 4.491 million barrels, or 1.06%, to 420 million barrels. In addition, the stocks in the SPR remained unchanged at 351.3 million barrels. Crude oil inventories at Cushing, Oklahoma were 758,000 barrels less versus 319,000 barrels less previously. The refined oil stocks declined by 3.185 million barrels, while the expected number was 1.36 million barrels lower, and the previous number was 1.837 million barrels less. Furthermore, the gasoline Inventories dropped by 2.371 million barrels, while the expected number was 1.097 million barrels less and the previous number was 1.313 million barrels less.

Focus: EIA gasoline inventory data and Powell's speech

Technical Analysis

WTI crude oil fell from highs yesterday. It once appreciated to 88.5, and then retraced to 86.2 instantly, closing the daily chart higher with a long-upper-shadow. Technically, MACD forms a golden cross at lows, and the SMAs expand upward, indicating a bullish trend. Therefore, investors should go long after retracements. At present, WTI crude oil is in an ascending channel with the lower support at 85.3. Comparingly, the resistance above is at 88.5, and further resistance is at 89.8. If WTI crude oil retraces to the support level, investors could catch the chance to go long. Similarly, investors should go short if WTI is boosted to the resistance. A higher profits/loss ratio is preferred, and investors should not chase the trend!

Trading recommendations: Buy low and sell high. If WTI crude oil depreciates to 85.3, investors could go long with small positions and set the stop-loss at 84.8. To take profits, the first target will be at 87.5, where they can move the stop-loss to breakeven, and the second target should be set at 88.5. Moreover, if WTI crude oil surges to 88.5, investors could go short with small positions and set the stop-loss at 88.8. To take profits, the first target will be at 86.3, where they can move the stop-loss to breakeven, and the second target should be set at 85.3.

Trading Recommendations

Trading direction: Long

Entry price: 85.300

Target price: 88.300

Stop loss: 84.800

Support: 86.300/85.300

Resistance: 88.500/89.500