Oil sees buyers coming in for now after sharp correction with questions at hand regarding Lebanon going forward

• Oil was trading flat on Thursday after a painful two-day correction.
• Markets are looking for clues about the outcome of Wednesday’s Biden-Netanyahu phone call.
• The US dollar index is rising this week ahead of the US CPI release on Thursday.

Crude oil is holding it together and appears to have found some support on Thursday after a two-day correction that erased nearly 5% of recent gains. Traders are clueless, however, with no clear comments after US President Joe Biden had a call with Israeli Prime Minister Benjamin Netanyahu on Wednesday. Meanwhile, Hurricane Milton slammed into the Florida peninsula and reduced power, though supply disruptions and extended delays are likely until oil production in the region can restart.

The US Dollar Index (DXY), which tracks the greenback’s performance against six other currencies, is rising again this week. The main driver is US Treasury rates, which are moving higher ahead of the US September Consumer Price Index (CPI) release on Thursday. Markets are beginning to doubt whether the US Federal Reserve (Fed) is indeed in a rate-cutting cycle, as expectations for no more major rate cuts this year begin to rise.

At the time of writing, crude oil (WTI) is trading at $73.60 and Brent at $77.23.

Oil News and Market Shifters: Escalation risk remains high on the agenda

• Libya’s oil company, National Oil Corporation (NOC), has announced the start of 5 new wells to be drilled and operational by early October. Around 12,000 barrels per day would be added, according to the Libya Observer and reported by Bloomberg.
• Investors remained alert to escalating tensions between Israel and Iran, providing additional support to prices, Reuters reports.
• On Tuesday, the U. Energy Information Administration downgraded its demand forecast for 2025 due to weakening economic activity in China and North America, according to Bloomberg.

Technical analysis of oil: support for the moment

Crude oil is a clear reflection of when you leave the markets behind without any hints or commentary. The fact that markets still have to guess what Prime Minister Netanyahu will do next means that markets are pricing in escalating risk premiums fairly quickly. More downsides could be seen as the days go by as Israel limits itself to small operations and very limited military activity in Lebanon.

Monday’s false break should be ignored as the move was fully associated on Tuesday. It means that the current pivot levels to the upside are still valid: the red downtrend line in the chart below and the 100-day simple moving average (SMA) at $75.63 above it makes this region very difficult to overcome. Once it holds above, the 200-day SMA at $77.15 should reject any further upside, as it did in early trading on Tuesday.

On the downside, similar observation as for up with all these pause drops. The rule of thumb is that if there hasn’t been a daily close below the level, it still represents support. The first is the 55-day SMA at $72.52, which acts as a potential first line of defense. A little further down, $71.46 (Feb. 5 low) comes into play as second support before looking back at the high of $70.00 and $67.11 as final support for traders to buy the dip.

US WTI Crude Oil: Daily Chart