OIL: Crude Recovers Ground with Focus on Peace Talks and US Stocks
Brent front month has recovered from a low of $61.6/bbl after falling 1.4% yesterday amid Ukraine-Russia peace hopes, finding some support from data showing a US crude stock drawdown and increased December Fed cut pricing.
- The market is monitoring Ukraine developments with the US’ Witkoff to present the revised proposal to Russian President Putin and Driscoll to meet the Ukrainians after Ukraine said there’s a “common understanding” with the US for a peace plan. Key issues around security and sovereignty are apparently still unresolved.
- The market remains under general downside pressure, pricing in an oversupply next year despite OPEC+ plans to pause output hikes in Q1. The OPEC+ group next meet on Nov. 30
- Goldman Sachs said a peace agreement could cut base case oil prices by $5/bbl into the low $50s next year, according to Bloomberg.
- Russian crude exports to China are heading for the lowest since Feb. 2022 at about 825kb/d in Nov. so far, impacted by sanctions and limited import quotas, Kpler data shows.
- API data yesterday showed a US crude stock fell 1.9mbbl and with a 0.3mbbl draw at Cushing. Gasoline stocks rose 0.5mbbl and distillates rose 0.8mbbl.
- EIA US crude inventories released later today are expected to show a draw of 2.33mbbl and with gasoline build of 0.62mbbl and distillates draw of 0.03mbbl and refinery utilisation 0.7%pts higher, a Bloomberg survey shows.
- Brent JAN 26 up 0.3% at 62.64$/bbl
- WTI JAN 26 up 0.2% at 58.09$/bbl
- Brent JAN 26-FEB 26 up 0.02$/bbl at 0.7$/bbl
- Brent JUN 26-DEC 26 unchanged at -0.12$/bbl
- EU Gasoline-Brent down 0.1$/bbl at 13.97$/bbl
- EU Gasoil-Brent up 0.3$/bbl at 26.59$/bbl
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WTI TECHS: (Z5) Has Breached The 50-Day EMA
- RES 4: $71.47 - High Jun 23 and a key medium-term resistance
- RES 3: $67.68 - High Jul 30
- RES 2: $65.77/68.43 - High Sep 26 and key resistance
- RES 1: $62.59 - High Oct 24
- PRICE: $61.55 @ 07:17 GMT Oct 27
- SUP 1: $59.64/55.96 - Low Oct 23 / 20
- SUP 2: $54.85 - Low May 5
- SUP 3: $54.16 - Low Apr 9 and a key support
- SUP 4: $53.23 - 1.764 proj of the Jul 30 - Aug 13 - Sep 26 price swing
The latest recovery in WTI futures appears corrective for now, however, note that price has traded through resistance at the 50-day EMA, at $61.13. The breach of this average signals scope for a stronger recovery . A resistance at $62.34, the Oct 8 high, has been pierced. A clear breach of this level would expose key resistance at $65.77, the Sep 26 high. Key support and the bear trigger has been defined at $55.96, the Low Oct 20.
BTP TECHS: (Z5) Pullback Appears Corrective
- RES 4: 123.14 1.764 proj of the Sep 3 - 11 - 25 price swing
- RES 3: 122.81 1.618 proj of the Sep 3 - 11 - 25 price swing
- RES 2: 122.53 1.500 proj of the Sep 3 - 11 - 25 price swing
- RES 1: 121.94 High Oct 17 / 24 and the bull trigger
- PRICE: 121.12 @ 07:06 GMT Oct 27
- SUP 1: 120.74 High Aug 5 and a recent breakout level
- SUP 2: 120.35 50-day EMA
- SUP 3: 119.48 Low Oct 7
- SUP 4: 119.07 Low Sep 25t
Bullish trend conditions in BTP futures remain intact and the latest pullback is - for now - considered corrective. Recent gains resulted in a break of key resistance at 120.74, the Aug 5 high and a bull trigger. The breach also highlights a range breakout. The bull trigger is 121.94, the Oct 17 / 24 high. Initial firm support to watch is 120.74, the Aug 5 high. Note that the contract is overbought, a deeper pullback would allow this condition to unwind.
UK FISCAL: Headlines from the weekend: Fuel duty, former PM, food prices (2/2)
- The Sun on Sunday also runs that the 5p/litre "temporary" cut to fuel duty is expected to be scrapped. This would of course raise revenue (around GBP900mln per year). But would not help with Reeves' pledge to help cut the cost of living.
- Former PM Rishi Sunak wrote an op ed in Sunday Times. He urges Chancellor Rachel Reeves to increase headroom at the Budget. One of the more interesting points he notes is that he notes that Reeves would probably not be discussing increasing the headroom if she wasn't given opening numbers from the OBR that had been better than those at the more pessimistic end of the range. Most of the rest of the interview was broadly in line with what you would expect from a former leader of the opposition.
- There are also continued reports that supermarkets are lobbying against any increases in business rates - noting that margins for supermarkets are incredibly thin. And that any increase in taxes would lead to further increases in food prices.
- A number of media reports point to reductions in the cash ISA limit to GBP10k from GBP20k (this has been speculated on for a long time now so isn't huge news).
