Crude Oil Forecast: Inventories drop, Geo tensions Rise, and USOIL Bounces

Houthi Red Sea Attack on Israeli Oil tanker leaves more than 200 km of oil slick in water
US Crude Oil inventories record a third consecutive drop, falling below the 5-year average
Fed Rate Cut expectations are fueling the bullish sentiment in the broader market

Oil prices rebounded from the $84.30 resistance, encountering a combination of bullish stops, which pulled prices back from the $79.54 low to above the $82 price zone.

Bullish Factors Contributing to the Latest Reversal of Crude Oil:

US Dollar Index Drop: The US Dollar Index fell to levels last seen in March 2024, influenced by easing monetary policies. This decrease in dollar pressure, combined with a bullish market sentiment, supports increased demand and positive sentiment in the oil market.
Geopolitical Tensions: To increase pressures towards a ceasefire, Iran-backed Houthis attacked an Israeli oil tanker in the Red Sea amid the Israel-Gaza conflict, causing a 200 km oil slick and disrupting trade routes. This led to higher shipping costs and increased oil prices as other ships had to take longer routes.
US Crude Oil Inventories: inventories dropped by 4.9 million barrels, down from the previous 3.4-million-barrel decrease and exceeding the expected 0.9-million-barrel drop. This significant decline reflects strong demand during the robust season and heightened economic activity.

Crude Oil Forecast: USOIL – Daily Time Frame – Log Scale

Source: Tradingview

Market Dynamics

The unity of bullish factors has resulted in a false breakout for the projected head and shoulders pattern, pulling the commodity back above the estimated neckline. The RSI recharged its momentum from the neutral 50 zone supporting the bullish rebound

Overall Analysis

While the overall consolidation of oil remains bearish below the $85 barrier, fluctuations in volatility and preset scenarios are adjusted as follows:

Bullish Scenario and Resistance Levels:

The latest high of $82.70 aligns with the 0.618 Fibonacci retracement of the move between the high and low of July 2024. A break above the mentioned high can lead towards the following level

Short-term Resistance Levels:

$83.25 (July 12 high)
$84.30 (July high)

Long-term Resistance Levels:

A close above the $85 zone is projected to drive the trend towards $87.30 (2024 high) and potentially $92.

Bearish Scenario and Support Levels:

Short-term Support Levels: $80.70 and the latest $79.50 low can support the next drops in oil

Long-term Support Levels: A drop below $79.50 can drive the trend towards $77 and $74 respectively.

--- Written by Razan Hilal, CMT

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.