Crude is below $70 despite US supply concerns

• Crude oil falls, partially reversing Monday’s gains.
• Oil fails to make a sharp comeback despite the market pricing in a big Fed rate cut and Tropical Storm Francine wiping out 3.6 million barrels of output.
• The US dollar index remains under pressure, trading at the lower end of its September range.

Crude fell on Tuesday, hovering around $68 and partially reversing Monday’s rally, which stalled near the $70 level. The drop comes even as oil is supported by some bullish drivers coming into play for this week. The first item is numbers from the passage of Tropical Storm Francine in the Gulf region, as the evacuation of the area will represent almost 3.6 million barrels less oil production last week.

Another factor that should support prices is growing expectations that the US Federal Reserve (Fed) will opt for a big 50 basis point interest rate cut on Wednesday. This helps boost crude oil prices on the assumption that a further rate cut would provide a brief boost to economic activity, which would in turn benefit oil demand.

At the time of writing, crude oil (WTI) is trading at $68.78 and Brent at $72.01.

Oil and market news: some near-term reprieve

• More than 12% of US Gulf crude oil production and 16% of natural gas production remain offline after Tropical Storm Francine hit the area, MT Newswires reports. Bloomberg reports that Francine dumped about 3.6 million barrels of oil last week, with lingering disruptions still in play for this week.
• The restart of a key oil pipeline in Iraq, which has already been shut down for more than a year, is facing several delays, with disagreements over costs, the nation’s Prime Minister Mohammed Shia AL-Sudani said. In this case, the bad news is good news because the pipeline cut helps Iraq maintain its OPEC production quota, Reuters reports.
• At 20:30 GMT, weekly inventory figures will come out from the American Petroleum Institute for the week ending September 13. Analysts expect a small drop of 100,000 barrels, much less than the 2.79 million barrel cut seen a week earlier.

Technical Analysis of Oil: A Breath for Crude Oil

Crude oil prices could reach a bid with recent data on Tropical Storm Francine providing some near-term headwinds for the commodity. The question is, however, how long the delay can go. With $70.00 on hand, at least one attempt to break above the high number level should be possible.

As already mentioned, the first level to watch on the upside remains $70.00. Once there was a daily close above that, $71.46 comes back on the table as the next level to watch. Ultimately, a bounce back to $75.27 is still possible, but would likely come after a seismic shift in current balances.

Support should be very close to $68.19, which was the triple bottom in the summer of 2023. The next level below is $64.38, the low of March and May 2023. Should the level respectively faces a second test and declines, $61.65 becomes a target, with of course $60.00 as a psychologically high number just below it, at least tempting to test.

US WTI Crude Oil: Daily Chart