After rallying to 3M high at US$60.4 after the drones and missiles hit Saudi Arabia’s oil facilities on 14 Sep, WTI prices corrected 10.6% to end at US$54 yesterday amid news that Saudi had restored full oil production and capacity to the levels they were before the attacks. Sentiment was further compounded by a bearish Sep US ISM manufacturing data which tumbled to a 10Y low as the US-China trade war weighed on exports. Nevertheless, oil prices could find near term supports at US$50-52 levels after crude production from the OPEC members fell to the lowest in eight years in Sep while output at the world’s two largest producers, the US and Russia, also fell in July and September respectively. Technically, oil price is envisaged to trap in range bound mode within US$52-58 territory unless it can successfully break above key 200D SMA near US$56.7, triggering more upside towards US$58.5-60.0 zones.

In consolidation mode unless successfully breaking above 200D SMA. After surging 25.5% to 3M high at USD60.4 from a low of US$50.5 on 7 Aug, WTI slid 10.6% to end at US$54 yesterday. In the near term, WTI price is likely to trend sideways unless it can successfully breach above the 200D SMA crucial resistance near US$56.7. A decisive breakout will lift prices higher towards US$58.5 (38.2% FR) and US$60 psychological barrier next. Key supports are pegged at US$52.4 (8 Aug low) and US$50.

Source: Hong Leong Investment Bank Research - 2 Oct 2019