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Fundamentals

In Wednesday's (October 11th) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at $84.6/bbl. Yesterday, WTI oscillated upward based on fundamentals, that is the supply/demand changes resulting from geopolitical conflict. Yesterday, the Arab countries and the U.S. did not join the Palestinian-Israeli conflict quickly as they used to do but stayed calm. In general, the U.S. and Middle-Eastern oil producers restricted themselves from the Palestinian-Israeli conflict but just kept the conflict running. Besides, some OPEC+ members also emphasized that they do not participate in politics, and the Palestinian-Israeli conflict will not have a major impact on the oil market, and investors should wait and see whether the scope of the conflict will expand. Moreover, the oil price declined during China's national holiday, which could be regarded as a complementary fall to release the demand. Once the market sentiment is stabilized, a rebound will emerge. Thus, investors need to manage the trade because the market is dominated by fundamentals instead of technical, and investors should focus on the fundamental changes.

Data: Yesterday, IEA claimed in the mid-term natural gas report that Russia's natural gas production in 2023 is expected to fall to its lowest level since 2009, which will put pressure on the upstream business and may lead to aging, fragile oil fields shut down. The agency did not give an absolute figure for Russia's gas production in 2023, but a chart in the report shows the level below 630 billion cubic meters. By 2026, its annual production is expected to grow by 9%, but still be down about 11% from its record high in 2021, a decline of 85 billion cubic meters.

Focus: API inventory data as well as EIA inventory data.

Technical Analysis

WTI oscillated yesterday, plummeting to 83.7 (in line with our expectations). Then, it gained support at 83.5 and appreciated again to 85.4 during the U.S. session, which is away from our expected resistance (86). After a significant retracement, the risks at highs are released and the MACD indicators reach the 0-axis. Then, the divergence disappears and a rebounding chance emerges. Nevertheless, the recent technical analysis is weak and the market is dominated by fundamentals. Thus, it is better to consider fundamentals as the technical are just supportive. Today, investors should focus on the trade from 83.5 to 85.8.  

Trading recommendations: Buy at lows. If WTI crude oil retraces to 83.5, investors could go long with small positions and set the stop-loss at 83.0. To take profits, the first target will be at 85.8, and the second target should be set at 86.8.

Trading Recommendations

Trading direction: Long

Entry price: 83.500

Target price: 85.800

Stop loss: 83.000

Support: 83.500/80.500

Resistance: 86.000/88.500