Oil Pushing Lower

Oil prices are pushing lower today, weighed on by a stronger US Dollar and fresh concerns about oversupply in the market. Notably, worrying developments in the Middle East have failed to boost oil prices, suggesting that for now traders are attaching little market-risk to the current situation in Lebanon. This could still change if, for example, Iran became involved in the conflict with Israel. However, for now, oil is taking its cues from elsewhere.

Powell Rates Pushback

On the Dollar front, comments from Fed’s Powell yesterday fell on the more hawkish side. The Fed chair pushed back against those calling for further .5% rate cuts, noting that the Fed’s projects two further .25% cuts as its base-case scenario. Looking ahead this week, US labour market data on Friday will be crucial for USD direction and have a major impact on commodities prices. Fresh weakness in the readings should boost easing expectations, sending USD lower and commodities prices higher. However, any surprise upside will likely see USD push higher near-term, weighing on commodities prices.

Oversupply Concerns

Finally, oversupply concerns are also weighing on sentiment here. Weak Chinese manufacturing data earlier in the week has curbed any demand optimism linked to recent Chinese stimulus. Additionally, traders are focusing on the winding down of some OPEC+ output restrictions in December which will bring more oil online. With US data weakening also, crude sentiment looks likely to remain skewed to the downside here.

Technical Views

Crude

The failure at the 72.61 level has seen the market turning heavily lower. Price is now testing below the bear channel lows and below the 67.45 level. Below here, and with momentum studies bearish now also, focus is on a test of 63.83 next.