Crude Falls Sharply, Short-Term Bearish Theme

Oil prices fell sharply on Wednesday on technical selling and market fears re the demand outlook. The downtrend began during the European morning and gathered pace in the US session. Prices are down 5.4% to their lowest since August 31. US yields were lower and the USD index fell 0.2%, which would normally have been supportive.

• Brent reached a high of $91.21/bbl during APAC trading but then fell 5.4% to close at $86.06. It breached $86 earlier falling to an intraday low of $85.75 below support of $87.64, the 50-day EMA. This opened up $81.33, the August 24 low. It has entered a corrective cycle with a short-term bearish trend. Brent is now 6.8% lower in October to date.
• WTI closed at $84.45/bbl and has started today lower at $84.22, just above Wednesday’s low of $84.16. It breached support at both $87.76, October 3 low, and $84.56, 50-day EMA. This has opened $77.32, August 24 low.
• The on line OPEC meeting was as expected with Russia and Saudi Arabia maintaining their output cuts. But both producers increased exports in September which has contributed to recent price declines. There is talk that Russia will ease its diesel export ban.
• US EIA crude inventories fell 2.22mn barrels with distillate down 1.27mn but gasoline up 6.48mn, adding to concerns of falling demand. The SPR rose 0.3mn. Refinery utilisation was down 2.2pp to 87.3%.