Oil corrects after Saudi ceasefire agreement and news rally

• Crude oil is under pressure again, already down more than 2.00% on Thursday.
• The additional stimulus from China is offset by rumors of Saudi Arabia and a proposed cease-fire over Lebanon.
• The US dollar index is holding steady ahead of a highly volatile calendar of data, with Fed Powell’s speech in focus.

Crude oil is down for the second day and sees losses accelerate on Thursday in what appears to be a sharp correction. Almost all of the gains in the rollout of China’s stimulus plan and the build-up of tension in Lebanon are offset by a cease-fire agreement tabled by the United States (US) and France during an emergency meeting at the United Nations (UN). An additional factor pushing crude oil prices further lower on Thursday is rumors that Saudi Arabia will drop its $100-a-barrel price target in light of the upcoming normalization of production, the Financial Times reports.

The US Dollar Index (DXY), which tracks the greenback’s performance against six other currencies, is trading flat, ahead of an expected highly volatile trading day. On the economic front, the third reading of US Gross Domestic Product (GDP) for the second quarter and August durable goods orders data are due. Add to that eight members of the Federal Reserve (Fed) taking the stage, and volatility will take place in the DXY later in the day.

At the time of writing, crude oil (WTI) is trading at $68.02 and Brent at $71.35.

Oil and markets news: Saudi Arabia aligns with reality

• Saudi Arabia is preparing to ditch its unofficial $100-a-barrel price target for crude oil as it prepares to increase production, the Financial Times reported on Thursday, citing people familiar with the matter.
• Signs that Libyan oil will return to the market are also weighing on prices after delegates from Libya’s divided east and west agreed on a process to appoint a central bank governor. This is a step closer to solving the crisis over control of the country’s oil revenues, Reuters reports.
• The US, France and several allies have called for an immediate 21-day ceasefire across the border between Israel and Lebanon, while also expressing support for a cease-fire in Gaza following intense talks at the UN, Bloomberg reports.
• Foreign Minister Israel Katz said there will be no ceasefire in the north because Israel will continue to fight Hezbollah, Bloomberg reports.

Oil Technical Analysis: Catalysts for Profit Taking

Crude oil traders could not enjoy their profits for a long time. A few counterarguments, such as the cease-fire agreement being put on the table and now Saudi Arabia releasing its oil price target, are enough to completely reverse the gains that have been made amid heightened tensions in the Middle East. Going forward, a further escalation in the Middle East with a land offensive could be enough to quickly push Crude back above $70.00.

At current levels, $71.46 is again in focus as the first rising price ceiling after a short false break. If the positive momentum continues, a pullback to $75.27 (high since January 12) could occur. On the way to this level, the 55-day simple moving average (SMA) at $73.83 could ease the upside a bit. Once above $75.27, the first resistance to come is $76.24, with the 100-day SMA in play.

On the downside, $67.11, a triple low in the summer of 2023, should support any downside. Below that, the next level in line is $64.38, the low of March and May 2023.