Crude Oil Update: API Data Sets Up Brent Crude Ahead Of EIA And FOMC

Brent Crude Oil (LCOC1) Talking Points

  • Grim global outlook weighs on brent.
  • U.S. economic data in the focus later today.
  • Brent crude trading at a key area of confluence.

Brent Crude Oil Fundamental Backdrop

Brent crude oil has marginally recovered in early trading after yesterday’s API Crude Stock Change data surprised to the downside reflecting a reduction in U.S. inventories by 448Mbbls (EST: 117Mbbls). Looking back at the CoT report below, we can see a slight uptick in open interest in brent crude oil after reaching lows last seen in 2015 – predominantly due to market hesitancy in terms of oil forecasts. This has much to do with the current geopolitical situation stemming from Russia/Ukraine which has now been exacerbated by slowing global growth concerns while other factors like the Iranian nuclear deal adds more complexity to the forward outlook.

Brent Crude Futures Commitment Of Traders' Open Interest

(Click on image to enlarge)

brent crude COT report

Source: Refinitiv

Later today, we look forward to EIA data as well as key U.S. economic data (see economic calendar below) including retail sales, but the main focus for today will come from the FOMC minutes release. Markets are looking for forwarding guidance as to whether or not the Federal Reserve will look to ease monetary policy in 2023 or look to quell the ‘pivot’ talk and maintain interest rate hikes. Money markets are currently favoring the easing narrative and should the FOMC push back, the dollar good find some bids and weigh negatively on brent crude prices.

Economic Calendar

economic calendar

Source: DailyFX Economic Calendar

Technical Analysis

Brent Crude (LCOc1) Daily Chart

(Click on image to enlarge)

brent crude oil chart

Chart prepared by Warren Venketas, IG

Pushing off 6-month lows, price action on the daily brent crude chart above has the 91.79 (38.2% Fibonacci) holding as short-term support. A key level that could spark a move lower should bears manage to pierce below.

Key resistance levels:

  • 100.00
  • 20-day EMA (purple)
  • 95.00

Key support levels:

  • 91.79
  • 90.00

IG Client Sentiment: Bearish

IGCS shows retail traders are NET LONG on Crude Oil, with 74% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we settle on a short-term downside bias.

More By This Author:

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