The WTI Crude Oil price of oil was lower again on Friday, with West Texas Intermediate crude travelling from a high of $56.75 to a low of $54.79 and ending the day down -0.80%. Prior to the cash close, WTI crude for November delivery has dropped lost 50 cents, or 0.9%, to settle at $55.91 a barrel on the New York Mercantile Exchange.
The partial cease-fire between Saudi and Yemen continues to see the geopolitical risk premium priced out of markets and for the week, futures prices for the front-month contract ended 3.8% lower.
“Reports that Saudi Arabia is ahead of schedule in restoring its output capacity continues to help crude oil prices weaken sharply lower,” analysts at TD Securities explained, adding:
“We continue to acknowledge that Saudi incentives are aligned to understate the impact of the attacks, but reports of its speedy recovery, when combined with sustained fears of waning demand growth, present a bleak macro picture for crude bulls.”
Trade talks continue to weigh
At the same time, the U.S. is considering limits on investor portfolio flows into China pressured prices, contributing to a loss of nearly 4% for the week considering that rising trade tensions between China and the US would hurt energy demand.
Crude Oil levels:
In today’s price action bears closed below the 50-daily moving average again and pierced the trendline support which guards space all the way back to the 54 and then the 52 psychological targets. Bulls will need to gather demand back above the 21-DMA to open prospects for the 59 handle that will then bring in the April highs at 66.58 on the wide as a target.
Bears are testing trendline support with 54 and then the 52 psychological targets in mind.
Saudi production, waning tensions in the Middle East and trade wars weigh on price.
Technically speaking, WTI is trading almost precisely in the middle of its 5-month range between 51.00 and 63.25. With both the RSI and MACD indicators showing neutral readings, it’s difficult for traders to have a strong bearish or bullish bias in the short term:
Less than two weeks ago, strikes on Saudi oil fields took out 5% of the world’s total production in the biggest single supply shock ever, causing oil prices to spike nearly 20%.
Today, oil prices officially erased the entirety of that surge.
It’s trite to say that markets are moving faster than ever, but this month’s price action in oil serves as an undeniable reminder of that fact. With Saudi production nearly fully recovered and news that the country has agreed to a partial ceasefire with Yemen’s Houthi rebels, the market is already looking ahead to the next hotspot that could influence oil’s global supply.
Now, traders are turning their attention to Iran. According to one headline, the Iranian President stated that the US had offered to remove all sanctions on the country in exchange for talks over Iran’s nuclear capabilities. Oil prices initially dropped on this apparent sign of progress in the region, but the news is now in dispute after some Iranian reporters suggested that the headline was mistranslated. In any event, the Trump Administration doesn’t appear keen to meet with Iran at present, so crude will continue to trade with a geopolitical risk premium in the near term.