After experiencing a few months of turbulence, the crude oil market has now entered a new equilibrium phase, mainly driven by the tension between weak global demand and tight supply. The market performance on October 1st was relatively stable, but there is still uncertainty behind it, especially the situation in the Middle East and the policy trends of OPEC+.

Market Review: Oil Price Fluctuations under the Game of Supply and Demand

On Tuesday (October 1st) at 15:37, Brent crude oil futures prices fell slightly by $0.68 per barrel to $71.15 per barrel; Meanwhile, WTI crude oil prices in the United States fell by $0.57 per barrel to $67.59 per barrel. Overall, the downward trend of oil prices is still quite evident, especially the overall performance in September which has dealt a certain blow to market confidence. Brent crude oil futures closed down 9% in September, marking the largest monthly decline since November 2022; And WTI fell by 7%. In terms of quarterly performance, Brent crude oil plummeted 17% in the third quarter, while WTI also recorded a 16% decline. These numbers undoubtedly reflect the market's ongoing concerns about weak demand.

IG market strategist pointed out that "OPEC+plans to increase supply before the end of this year, while the global economic growth momentum is insufficient, which limits the upward space of oil prices. However, the market's response to weak data is not intense, as global investors still have expectations for the effectiveness of economic stimulus policies." This also explains why oil prices have not risen significantly despite the escalating situation in the Middle East.

Middle East situation: Geopolitical risks fail to effectively boost oil prices

The current tense situation in the Middle East is undoubtedly one of the focuses of market attention. The Israeli military announced earlier today that it has launched a "limited" attack on Hezbollah targets along the Lebanese border. This series of military actions indicates that further escalation of regional conflicts is inevitable and may involve Iran and the United States as well. Last Friday, Israel killed Hezbollah leader Nasrallah, and the situation quickly deteriorated thereafter. However, it is worth noting that the market does not seem to have fully priced this risk.

IG analysts say that although the escalation of the Middle East situation does pose potential risks to future supply, the main focus of the current market is still on the reality of weak global demand growth. On the supply side, OPEC+plans to increase daily production by 180000 barrels in December, further reinforcing market concerns about oversupply. Therefore, although geopolitical risks are gradually increasing, their driving effect on oil prices has not yet become apparent.

The existence of this supply pressure, in parallel with the tense situation in the Middle East, has plunged the market into a complex game: on the one hand, the expectation of increased supply has suppressed the rebound of oil prices; On the other hand, geopolitical risks provide support. However, overall, weak demand still dominates market sentiment.

Technical aspect: The key support level of WTI is stable, and the bullish trend is awaiting verification of momentum

From a technical perspective, WTI crude oil futures are currently above the key support level of $68.55 per barrel and have maintained a relatively stable volatile market around this level. Technical analysis shows that if WTI can gain sufficient upward momentum, it is expected to initiate a new round of rebound, with a primary target of $70.44 per barrel and a further upward target of $71.95 per barrel. It is worth noting that if the price falls below the support level of $68.55 per barrel, the market will re-enter a bearish trend, and the target levels will be lowered to $67.55 per barrel and $66.65 per barrel, respectively.

Overall, the trading range for WTI today is expected to be between the support level of $67.80 per barrel and the resistance level of $70.80 per barrel. Although technical indicators currently show bullish signals, whether the target price can be successfully reached still depends on whether the market can provide sufficient momentum, especially in the face of an unfavorable global demand outlook.

Brent crude oil: Technical indicators show rebound potential

Brent crude oil futures have also shown strong technical support, with prices currently hovering around the support line of $72.00 per barrel and waiting to gain new upward momentum. According to random indicators, the market is currently waiting for further signals to push prices back into a bullish trend. The first target price is $73.80 per barrel, and after breaking through, it is expected to further rise to a high of $75.24 per barrel.

According to market analysis, the trading range for Brent crude oil today is expected to be between the support level of $71.40 per barrel and the resistance level of $74.40 per barrel. The trend forecast still tends to be bullish, but it should be noted that if the price falls below the key support level of $70.90 per barrel, the rebound momentum of Brent crude oil will be forced to be interrupted.

Inventory data: Pay attention to API reports

Another important factor affecting the market is inventory data. According to a preliminary investigation on Monday, it is expected that the inventory of crude oil and refined products in the United States will decrease by about 2.1 million barrels in the week ending September 27th. This data will be released later today by the American Petroleum Institute (API), and its results may provide further guidance for short-term oil price trends.

A decrease in inventory is usually seen as a sign of supply tightening, often providing support for oil prices. However, considering the sluggish global demand, it remains to be seen whether the effect of inventory reduction can continue to affect oil prices.

The current pattern of the crude oil market is full of complexity. The escalating situation in the Middle East has provided some support for oil prices, but this risk has not yet been fully reflected in prices, and the market is still paying more attention to the global economic outlook and OPEC+supply trends. The reality of weak demand is difficult to improve in the short term, which suppresses the upward potential of oil prices.

From a technical perspective, both WTI and Brent crude oil are near key support levels, and if they can gain enough upward momentum, they are expected to rebound in the short term. But once it falls below the key support level, the market may turn bearish again. Investors should closely monitor the API inventory data later today and whether subsequent economic stimulus policies can boost global demand.

Overall, despite market volatility, oil prices may fluctuate within the current range in the short term, awaiting clearer guidance.