Slips into Q4 on supply fears :: InvestMacro

• OPEC+ JMMC, EIA & NFP in focus

• Over past year US NFP triggered ↑ 0.4% & ↓ 1.9%
  

• Key level of interest – $70.80

The past few months have been rough and rocky for oil benchmarks.

Crude and Brent shed over 16% in Q3 due to expectations around OPEC+ bringing back production while a slowdown in China rubbed salt into the wound.

Oil has already entered October on the back foot, falling 1% thanks to the bearish market sentiment.

Many forces are set to influence prices, ranging from China’s stimulus plans, a return of Libya’s oil production, ongoing geopolitical tensions, and bets around lower US interest rates.

This potent cocktail may translate to significant price swings in Q4.

Regarding Libya, the producer is preparing to restore output after a month-long shutdown. This is likely to fuel concerns over supply at a time when OPEC+ may move ahead with planned production increases in December.

The OPEC+ Joint Ministerial Monitoring Committee meeting on Wednesday 2nd October is expected to conclude with no policy changes. However, any hints of further delays to the planned production increase beyond December may support oil.

Also, watch out for the EIA data on Wednesday and US jobs report on Friday which could inject oil benchmarks with more volatility.

As covered in our week ahead report, the US jobs report has the potential to impact Fed cut cuts.

Note: Lower interest rates could stimulate economic growth, which fuels oil demand. Lower interest rates may also lead to a weaker dollar, which boosts oil which is priced in dollars.

Golden nugget: Over the past year, the US jobs report has triggered upside moves on Brent of as much as 0.4% or declines of 1.9% in a 6-hour window post-release.

Looking at the technicals…

Prices are under pressure on the daily charts with Brent respecting a bearish channel.

There have been consistently lower lows and lower highs while the MACD trades to the downside. However, daily support can be seen around the $70.80 level.

• A solid breakdown and daily close below $70.80 could send prices back toward $68.80 and the levels not seen since December 2021at $67.00

• Should $70.80 prove reliable support, this could trigger a rebound toward the 21-day SMA at $72.30 and $75.00.