Is crude oil’s rally driven by speculation only?

Sébastien Bischeri Sunshine Profits

After the surge, the WTI Crude Oil still faces some global risk sentiment strong enough to make it fly higher. Will it pop like a helium balloon?

Fundamental analysis

It appears that oil prices are being supported by speculators who have ignored signs of a slowing economy around the world. Nonetheless, the black gold may face a bearish supply forecast soon, which could potentially put it at risk of a pullback.

Furthermore, with a disappointing GDP in China in the third quarter and industrial production falling in September in the United States, the world's two largest economies have lost momentum, which could affect the level of energy demand.

Consequently, this context of state interventionism on energy prices is likely to reduce the transfer of demand from the coal market to petroleum products, depriving the crude of one of its wings that lifted it for a number of weeks.

U.S. API weekly crude oil stock

Inventory levels of US crude oil, gasoline, and distillates stocks, American Petroleum Institute (API) via Investing.

Regarding the API figures published Tuesday, the increase in crude inventories (with 3.294 million barrels versus 2.233 million barrels expected) implies weaker demand and is normally bearish for crude prices.

However, we have to see whether or not these figures will be confirmed by the weekly Energy Information Administration (EIA) report.

If that scenario is confirmed by the EIA’s figures later today, then the black gold may be set for a corrective wave, possibly back to previous support levels.

WTI Crude Oil (CLZ21) Futures (December contract, daily chart)

In conclusion, anything can happen in this market in the forthcoming days… Therefore, no position in the WTI Crude is justified from the risk-reward perspective at the moment. However, things change quickly, and when they do, you don’t want to miss it! Subscribe to our premium Oil Trading Alerts to be the first to know about our trading outlooks, which are published as soon as opportunities arise.

Want free follow-ups to the above article and details not available to 99%+ investors? Sign up to our free newsletter today!

Author

Sébastien Bischeri

Sunshine Profits

Sebastien Bischeri is a former Reserve Officer in the French Armed Forces (Navy), and began his career in computer science and engineering, prior to move into banking, finance, and trading.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.