Crude Oil Update: Oil Slips Below the Critical $70 Zone

Key Events

2024 oil gains are erased as USOIL and UKOIL retest December 2023 lows
US ISM Manufacturing PMI falls short of expectations
US ISM Services PMI (Thursday)
US Employment indicators (Wednesday - Friday)
FOMC members Williams and Waller statements following the NFP report on Friday

Manufacturing PMIs (China – US)

The US ISM Manufacturing PMI came in at 47.2, below both the 50-expansion mark and the expected 47.5, increasing concerns about global demand. This follows China’s weaker-than-expected Manufacturing PMI of 49.1, which has added to broader market concern as we enter September.

US Dollar Index, US Employment Indicators, and FOMC Member Speeches

Despite expectations of a rate cut in September, the US Dollar remains above its December 2023 lows, exerting additional pressure on oil. The durability of this support will be tested by Thursday's ISM Services PMI, an indicator critical to inflation trends, and Friday's non-farm payrolls report, which will influence the expected rate cut magnitude. High volatility is anticipated to close out the week, especially following remarks from FOMC members Waller and Williams.

OPEC Policies

OPEC's early 2024 interventions near current oil trading levels involved reducing output. The latest meeting highlighted the flexibility of future policies, depending on market conditions for October, leaving room for further interventions. Currently, bearish pressures dominate, but there is cautious anticipation of potential bullish intervention.

Technical Outlook

Crude Oil Update: USOIL – Weekly Time Frame – Log Scale

Source: Tradingview

Crude oil has broken below its extended consolidation, entering a critical zone marked by significant wicks and rebounds between May and June 2023. This raises risk management concerns around the $67-68 level.

A close below the December 2023 low of $67.80 could push the trend toward the first support at $65.30, with further downside risk to the $60-58 range. On the upside, resistance is expected between $71.90 and $74, aligning with the lower border of the previous consolidation.

Crude Oil Update: UKOIL – Weekly Time Frame – Log Scale

Source: Tradingview

In a similar pattern to USOIL, Brent is testing its December 2023 lows near the $72.30 level, with volatility risks rising as it nears the $71 zone—an area known for significant wicks and rebounds. A close below the $71 zone could extend the downtrend towards $67.40 and possibly $60.

On the upside, potential resistance levels are near $75.20 and $77.40, where bullish corrections could occur.

Given OPEC’s earlier intervention at the beginning of 2024, which helped stabilize oil prices, and the current rate cut sentiment, the possibility of further intervention remains on the table as oil approaches these critical zones. Additionally, geopolitical tensions continue to loom in the background of the charts, adding an element of caution to the market's direction.

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

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.