Crude Oil Outlook: Week Ahead

Key Events for the Week Ahead

• Crude Oil Inventories (Wednesday)
• US Prelim GDP (Thursday)
• US Core PCE (Friday)
• Chinese Manufacturing and Non-Manufacturing PMI (Saturday)

Fed Powell’s Latest Remarks

Focus is shifting away from inflation trends to gauge the confirmation and magnitude of the next policy decision on September 6. Chair Powell has clearly indicated the beginning of a monetary easing cycle in September with a likely 25 basis point cut, assuming the latest economic data aligns with expectations. The emphasis is on the labor market, as the Fed aims for conditions away from further cooling.

Chinese Economic Data

As one of the major factors influencing oil’s recent downturns, upcoming data from the Chinese economy will be fundamental. Scheduled for Saturday, the Manufacturing and Non-Manufacturing PMI figures will provide insight into the strength of China’s industrial activity. While weakness is evident in the manufacturing sector, non-manufacturing PMIs are showing expansion above the 50-mark.

Technical Outlook

Analyzing the US Dollar Index:

Crude Oil Outlook: DXY – 3 Day Time Frame – Log Scale

Source: Tradingview

The Fed's announcement of monetary easing has pushed the US Dollar Index back to its December 2023 lows, with the Relative Strength Index (RSI) on a 3-day time frame also nearing oversold levels last seen in January 2018. Without a clear catalyst for reversal, the next level to watch is the July 2023 low.

Crude Oil Perspective

Crude Oil Outlook: USOIL – 3 Day Time Frame – Log Scale

Source: Tradingview

The decline in the US Dollar, coupled with bullish sentiment surrounding potential upcoming stimulus, has allowed crude oil to rebound from its 2024 lows and return to the consolidation zone. Currently positioned near the lower boundary of its consolidation around the 75-resistance zone, there is still a possibility of a pullback towards the lower 70 range. However, the upcoming week's data—including crude oil inventories, US GDP, US Core PCE, and Chinese Manufacturing PMIs—will offer a more definitive insight into oil demand, moving beyond speculative projections.

• Bearish Projections: A drop below the 70-69 barrier is expected to align with support zones at 65 and 60-58.

• Bullish Projections: A rise above the 76 zone is expected to align with resistance levels near 77.90 and 80.

--- Written by Razan Hilal, CMT – On X: @Rh_waves