Analysis | October 13, 2020

KTM FX Weekly: More consolidation required

Brent crude oil price recorded the fifth consecutive week of consolidation during September-October. However, price swings are too wild with weaker oil market sentiment and concerns over US fiscal support negotiations and the US presidential election.

S&P Platts reported, “Sentiment was weighed by reports on October 11 that Libya’s state-owned National Oil Corp. had lifted the force majeure on Sharara, the country’s top-producing oil field.”

News: On Sunday, October 11, National Oil Corporation confirmed for Lifting force Majeure on Al Sharara Field. Force majeure could pump out as much as 300k bdpd. This event could hurt the supple demand equation further. Lack of demand to catch up with the current supply is already creating awry to the oil market. On top of this, additional supply means near-term oil price could cap.

  • Warren Peterson and Wenyu Yao at INS said, “Reports suggest that output will initially be 40Mbbls/d, and that it would take 10 days for output from the field to reach its capacity of 300Mbbls/d. If this turns out to be the case, it would take Libyan output back to the region of 600Mbbls/d, and not helping OPEC+ in the task of rebalancing the market.”

Catalysts: Oil traders are waiting for the IEA Oil Market report. We focus on any upside demand forecast that are made to their monthly statement. Moreover, the upcoming US Presidential election outcome will be the primary catalyst for the medium term’s oil price. An agreement between Biden and the Middle East means more supply in the coming years into an already oversupplied market.  

Technical view: Since mid-September, the oil price has been capped around 14-ema on the weekly chart. The daily indicators are mixed while weekly are bearish. Under these conditions, one can expect more consolidation in the coming days.

Pivotal finds at $41.40 below here, $40.80 and $39.90 exists. If the price is moving higher, watch out for resistance at $43 and $43.75-44.20.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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