United States Oil (USO) holds most huge gains after Saudi attack, Fed moves into view
Oil prices dipped Tuesday but held most of the previous day’s record gains following an attack on Saudi facilities that wiped out half the country’s output, with traders nervously awaiting the US response after it said Iran was likely to blame.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter as well as other producers.
It has also taken attention away from the upcoming trade talks between China and the US as well as a much-anticipated policy meeting of the Federal Reserve, which is expected to see it cut interest rates.
Trump said he was ready to help Riyadh following the strikes but would await a “definitive” determination on who was responsible.
Iran-backed Huthi rebels in Yemen have claimed responsibility but Washington and Riyadh have pointed the finger at Tehran, which denies the accusations.
Trump appeared to temper his earlier warning that the US was “locked and loaded” to response, saying: “I’m not looking to get into a new conflict, but sometimes you have to.”
The weekend’s attack sent both main oil prices surging almost 15 percent on Monday and managed to hold most of those in early Asian trade with WTI and Brent dipping a little more than one percent.
Uncertainty and geopolitical fears hit regional equities, which had been enjoying an upbeat month thanks to easing trade war tensions and fresh easing measures by global central banks.
– Vulnerability –
Hong Kong fell 0.9 percent with sometimes violent unrest adding to the financial hub’s woes and dragging on the economy.
Tokyo ended the morning down 0.1 percent as investors returned from a long weekend, Shanghai slipped 0.8 percent, Sydney shed 0.1 percent and Singapore retreated 0.4 percent.
Taipei and Manila were also lower, though Seoul, Wellington and Jakarta rose slightly.
But while there are fears of a conflagration in the Middle East, observers said the chances of that were low.
“Despite the circumstantial evidence, I feel the barrier of proof would have to be very high indeed. Almost impossibly so as there are zero appetites in the world for a military conflict with Iran,” said Shayne Heffernan, Founder and CEO of Heffx.
He said the most likely outcome would be more severe sanctions on Iran, though he pointed out: “What is clear is that Saudi Arabian oil infrastructure is more vulnerable than thought, and a risk premium will be built into oil prices going forward.”
Analysts said the Fed would probably consider the Saudi attack’s possible impact on the economy and prices when deciding on its next monetary policy move this week but tipped it to cut borrowing costs after its meeting Wednesday.
Also providing some optimism was news that Chinese vice finance minister Liao Min will visit the United States on Wednesday to “pave the way” for the higher level talks planned for next month.
On foreign exchanges the aversion to riskier assets pushed the dollar up against high-yielding currencies, while the pound fought to recover from Monday’s losses.
Sterling dropped Monday after European officials said British Prime Minister Boris Johnson had offered no new, viable ideas to break the Brexit impasse during talks with EU chief Jean-Claude Juncker.
– Key figures around 0230 GMT –
West Texas Intermediate: DOWN 1.5 percent at $61.96 per barrel
Brent North Sea crude: DOWN 1.1 percent at $68.21 per barrel
Tokyo – Nikkei 225: DOWN 0.1 percent at 21,964.74 (break)
Hong Kong – Hang Seng: DOWN 0.9 percent at 26,873.31
Shanghai – Composite: DOWN 0.8 percent at 3,005.25
Pound/dollar: DOWN at $1.2417 from $1.2424 at 2300 GMT
Euro/pound: UP at 88.63 pence from 88.56 pence
Euro/dollar: UP at $1.1006 from $1.1002
Dollar/yen: UP at 108.20 yen from 108.10 yen
New York – Dow: DOWN 0.5 percent at 27,076.82 (close)
London – FTSE 100: DOWN 0.6 percent at 7,321.41 (close)
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 11.82.
The projected upper bound is: 13.78.
The projected lower bound is: 11.91.
The projected closing price is: 12.85.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 7 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 50.3979. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 65.94. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 65 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 275.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 23 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 1.390 at 12.830. Volume was 176% above average (trending) and Bollinger Bands were 14% narrower than normal.
Open High Low Close Volume___
12.490 13.160 12.450 12.830 81,019,984
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 11.79 11.68 11.74
Volatility: 76 50 43
Volume: 32,497,770 29,582,336 27,522,304
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND gapped up today (bullish) on heavy volume. Possibility of a Breakaway Gap which usually signifies the beginning of a major market move. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
UNTD ST OIL FUND is currently 9.3% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on USO and have had this outlook for the last 8 periods.
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