UK Oil

08:24, 15 October

Falls to Support at $80 on Market Sell-Off

In the last week or so, oil has eased lower from its multi-year high above $86, although the fall accelerated in the last few days to finish the week. Oil has enjoyed a very healthy last couple of months moving from the key $71 level to its highs before easing back to its current trading levels. It is highly likely to enjoy some support from the current $80 level. For a couple of weeks oil was struggling with the resistance around the key $80 level despite strong surges higher in the few weeks leading up to it, however, it was finally able to surge higher through the resistance level at $80 to reach the multi-year highs.

Just prior to this pronounced move up to its recent highs, oil was content to remain within its trading range between $71 and $75. Through May and June oil had established a trading range between the two key levels of $75 and $80, with the former offering reasonable support during that time. It is no surprise that the $75 level is now providing some resistance to higher prices. During this time oil reached a three year high in May above $80.
It is hard to argue against the strength of oil over the last ten months or so as it has moved from below $45 to its current trading range. After drifting lower to start last year, the second half of 2017 saw oil move strongly to move through previous resistance at $57 although it did stall around that level for a few weeks before surging higher. After reaching the three years high around $71, oil fell strongly to below $62 in under three weeks however it did well since to consolidate a little and hold above $65.

Oil fell sharply last week as a closely watched forecaster said world oil supply is adequate and the outlook for demand is weakening. The monthly report by the International Energy Agency (IEA) released on Friday said the market looked "adequately supplied for now" and trimmed its forecasts for world oil demand growth this year and next."This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data," said the IEA report. The IEA report is another assessment to predict weaker demand ahead and conclude that supply is adequate. The Organization of the Petroleum Exporting Countries (OPEC) had a similar assessment. The International Monetary Fund (IMF) has cut its global growth forecasts as trade tensions between the U.S. and its trading partners have started to hit economic activity worldwide. The IMF said the global economy is now expected to grow at 3.7% this year and next year, which is 0.2% points from an earlier forecast.