Crude oil prices advanced on Monday morning following Sunday’s news that Saudi Arabia is planning to slash oil output by half a million barrels a day in the coming months in an attempt to boost price.

The country’s energy minister said they are seeing a tapering off at year-end, a comment that reverses their earlier commitment to reduce output under the pressure from US President Trump. Saudi also raised concerns over softening demand for energy as global economy cools, which causes oversupply in the market.

Energy and resource sector pulled global equities lower on Friday as Brent Crude oil price dived below $70 per barrel and reached six-month low on renewed concerns over global oversupply. Several key factors, including waiver of several of Iran’s largest importers from US sanctions, continued increase in US output and a weaker demand outlook amidst escalating trade spat, weighing on oil prices. Recent news that Iraq is closing in on a deal to resume Kirkuk oil exports, which would potentially add 0.4 million bpd on global output, adding on glut concern.

Falling crude oil price has affected Singapore’s stock market in a negative way, hurting its oil & gas industry, offshore & marine sector and the lenders due to their large exposure to the oil-related business. Sembcorp Marine, Keppel Corp, Sembcorp Industry and banks were part of those vulnerable against falling oil prices.

Technically, Brent crude price is riding a bearish trend with both of its 10-Day SMA and SuperTrend (10 2) sloped downwards. Momentum indicator MACD and DMI has yet to give early reversing signal yet. Brent has come to its 161.8% Fibonacci Extension level at 69.45 area, with its next support level potentially found at around 66.51 area (200% Fibonacci Extension). Momentum indicator RSI has dived deeply into oversold territory below 30%, as the bearish trend is strong.

Week ahead:

  • Monday:
    • Japan Corporate Goods Price data a potential mover for Nikkei and JPY pairs.
    • China M2 and New Yuan loans an indicator of monetary expansion and economic health, likely to impact Asian market sentiments.
  • Tuesday:
    • UK unemployment claimants change and unemployment rate – both measures of economic health and leading indicator of consumer spending. Lower unemployment figure is positive for stocks and sterling.
  • Wednesday:
    • Japan GDP – key indicator of economic growth and inflation, and likely to move Nikkei and JPY.
    • Australia Labour Price Index – high impact on AUD. June and March wage growth in Australia both remained at annualised rate of 2.1%, in line with consensus. An uptick figure will likely strengthen the outlook of AUD as it indicates higher consumer spending and inflation pressure. Consensus forecast is 2.3%.
    • China Industrial output and Retail sales – Industrial output is expected to moderate by 0.1 percent to 5.7% due to a broader slowdown in economy amidst challenges from US tariffs. Retail sales growth is expected to remain resilient at 9.1%
    • Germany 3Q GDP Flash Estimate – key mover for Euro, Dax and Euro Stoxx. 3Q GDP is expected to retrace to 1.2% from 2.3% seen a quarter ago due to high watermark in the previous year, as well as lacklustre trade data in the summer months.
    • UK CPI – GBP
    • EU 3Q GDP Flash Estimate – High impact on Euro, European indices. 3Q GDP is forecasted to slow down further to 1.7% from 2.2% in the previous quarter, suggesting that a cyclical upswing of Eurozone’s economy since early 17 has run out of steam.
    • US CPI – inflation data is a key for Fed to set its monetary policy. Higher reading is likely to lead to stronger USD whereas lower reading is likely to do the reverse.
    • DoE Weekly Petroleum report – Crude oil stocks (net Change) – high impact on Crude oil price. US commercial inventory has been built aggressively for seven consecutive weeks, suggesting ample supply in the market. Crude inventory change has high negative correlation with crude oil price movements.
  • Thursday
    • AU unemployment rate – Australia’s unemployment dropped sharply to 5% in the month of October, hitting policymaker’s definition of ‘full employment’. This month’s unemployment figure, together with wage growth rate, will be closely watched to assess the strength of jobs market and its implication on RBA’s monetary policy.  
    • UK retail sales – GBP and FTSE 100
    • US weekly unemployment claims and Retail Sales – USD
  • Friday
    • EU CPI – Euro
    • US industrial Production – leading indicator of economic health, higher industrial production suggests more jobs creation and higher earnings. November figure is likely to ride on upward momentum and gain 0.2% from the previous month. Strong reading is positive for USD and US equities.

Crude Oil Brent – Cash

By Margaret Yang in Singapore

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