Crude rebounds slightly after NFP sell-off

• Crude is recovering slightly after falling below $67 on Friday following weaker-than-expected U.S. data.
• Markets see global demand deteriorating further, while the US Federal Reserve is not expected to cut interest rates aggressively.
• The US dollar index is trading above 101.50, extending recent gains.

Crude oil rebounded slightly on Monday after falling on Friday after the US jobs report showed the US economy is cooling but not on the brink of a recession, reducing the chances of a massive 50 basis point rate cut. base against the US. The Federal Reserve (Fed) in its next meeting on September 18. This means there will be no increase in demand from the US, while other big oil consumers such as China and India are also experiencing weaker economic activity.

The US dollar index (DXY), which tracks the performance of the US dollar (USD) against a basket of currencies, rose for a second straight day. The initial pop came on the back of the US Jobs Report on Friday. It appears that markets have clearly undervalued the greenback too much, assuming the Fed would cut rates by 75 or even 100 basis points by November, which is unlikely to be the case given recent healthy economic data in US.

At the time of writing, crude oil (WTI) is trading at $68.05 and Brent at $71.79.

Oil and market news: Trafigura paints it black

• Bloomberg reports that major commodities traders Trafigura Group and Gunvor Group Ltd. painted a bleak picture for oil, with lingering concerns about oversupply and demand in China. Trafigura Group said OPEC+ faces a dilemma when it comes to reconciling the group’s goals with market needs.
• Morgan Stanley has issued another price cut in its forecast for the second time in just a few weeks. Reuters reports that the bank sees Brent near $75.00 for the fourth quarter.
• Meanwhile, China is seeking to strengthen ties with some oil-producing countries, with Chinese Premier Li Qiang set to visit Saudi Arabia and the United Arab Emirates this week, Beijing’s Foreign Ministry said on Monday, AFP reports.
• A weather system in the southwestern Gulf of Mexico is forecast to become a hurricane before reaching the northwestern US Gulf Coast, the US National Hurricane Center announced on Sunday, Reuters reports. The area accounts for more than half of the country’s refining capacity.

Oil Technical Analysis: Cold Winter for Oil

It’s time to roll lower for oil after leading experts Trafigura Group and Gunvor Group both issued statements saying more recession is coming for the fossil fuel. In fact, it doesn’t take an expert to believe that more recession was inevitable, with US export levels at record highs and Russia unable to sell its crude to China and India without stepping on the toes of its OPEC+ partners. The economic slowdown only further exposes the problem of oversupply, which could mean another recession to come.

Additionally, $75.27 will be the first level to which it will return. Next, the $77.43 level aligns with both a downtrend line and the 200-day simple moving average (SMA). If the bulls can break through, the 100-day SMA at $77.71 could trigger a rejection.

On Friday, the key $67.11 level was broken very briefly. For now, the range between $67.11 and the high of $68.00 should be viewed as a hawkish risk of further declines. The next level below is $64.38, the lowest since March and May 2023.

US WTI Crude Oil: Daily Chart