Oil flirts with a bullish breakout as hurricane Adalia hits Florida

• Oil (WTI) could see a boost in its price with hurricane Adalia and OPEC+ production cuts. 
• US Dollar strength tops out and could start to abate as risk-on sentiment slows demand for the Greenback.
• This evening the American Petroleum Institute is due to print its weekly numbers. 

Oil prices are heading higher in an overall bid for energy commodities since last week. Next to Crude Oil prices rising, Natural Gas prices were on a tear as well on Monday. With hurricane Adalia set to hit Florida and Georgia soon, oil distribution for the US southeast could get disrupted and have repercussions for the more northern states. 

As if that is not enough, the current slowdown in China’s recovery is giving OPEC enough reason to cut even more production into its next meeting on November 26. Some bullish forces are starting to build. Should this Tuesday’s numbers from the American Petroleum Institute print a bigger than expected drawdown, a perfect cocktail is present to see the Oil price for WTI rallying up to $84.

At the time of writing, Crude Oil (WTI) price trades at $80.10 per barrel and Brent Oil at $84.03

Oil news and market movers

• All eyes are on the American Petroleum Institute (API) numbers this week, due at 20:30 GMT. Last week there was a draw of -2.418M.
• This week Friday’s monthly US jobs report takes precedence over other indicators. After the US Federal Reserve repeated it stance at Jackson Hole for keeping rates higher for longer, any sudden slowdowns in the US jobs market could force the hand of the Fed to start easing market conditions by  cutting rates, which would mean a weaker Greenback as a side effect. 
• Hurricane Adalia is making its way to Florida and is about to hit the peninsula by 8 AM this Tuesday. The production and supply for the Eastern part of the United States could come under pressure and might see Oil prices shooting higher as less supply will be available in a brief period. 
• The sluggish Chinese economy is helping OPEC+ to start thinking about more production cuts in order to keep Oil prices afloat at current levels. The next meeting is still quite far away though on November 26. Meanwhile, rumours and speculation will start to build up toward that date. 
• Some cargoes of Russian crude for October were offered at a lesser discount to the ICE Brent price between Russia and China.
• Saudi Arabia is considering extending its production cut for longer, which could limit the supply side in oil in the coming days. 
• Equity markets are rallying for a second straight day this week and are helping demand for commodities overall. 

Oil Technical Analysis: one line to watch

The Oil price is ticking up nicely since it started its rally last week. The turnaround came with a knee-jerk reaction where the weekly API numbers were only showing a minor drawdown that pushed oil prices further lower. Yet, on August 23rd,  the Department of Energy (DOE) printed a massive drawdown of over 6M barrels. 

On the upside, $81.68, Monday’s high, is the one to beat in order to trigger a small uptrend. Should WTI continue to rally and break that red descending trendline, more new highs will come into play. In order to print a fresh monthly high, the peak of mid-August at $84.32 is the target when demand takes over and supply cannot follow suit. 

On the downside, a temporary bottom is being formed around $77.50 and acts as a base for this week. Should the Baker Hughes Rig Count jump substantially higher, expect to see the floor tested as more supply is bound to come online. Once bears make it through that orange box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off. 

WTI US OIL (Daily Chart)