Crude Oil Consolidates, Market Awaits US PCE Data Release

Crude oil retreated after surging to $89.5 last Friday and has been oscillating within the range of $83 to $88 this week.

In recent days, the Israel-Palestine conflict has escalated significantly, with Israel launching a ground operation in the Gaza Strip, aiming to sustain attacks on Hamas for several months. Additionally, more countries such as Hezbollah in Lebanon, Houthi militants, Iraq, Syria, and even the United States becoming involved in this conflict have raised concerns about the potential expansion of the Middle East situation. These worries have become a major driver of the oil price increase.

Following the outbreak of the Israel-Palestine conflict, market expectations of sustained oil price growth can also be observed in the number of active drilling rigs in the United States. Last Friday (October 20th), the number of active oil rigs in the U.S. was 502, slightly higher than the 501 during the week when the conflict began. As geopolitical tensions continue to escalate, the increase in the number of active drilling rigs suggests that oil prices may continue to rise.

Source: MacroMicro

However, recent global high-frequency oil inventories have shown a slowdown in destocking efforts. Saudi Arabia's exports have rebounded noticeably since September, partially filling the market gap and easing the fundamental contradictions.

Furthermore, tonight, the September Core PCE Price Index will be released, with market expectations of a year-on-year increase of 3.7%, slightly lower than the previous reading of 3.9%. If the actual value exceeds expectations and rebounds, it may exert downward pressure on oil prices in the short term.

From a technical perspective, oil prices are still trading above the 200-day moving average, indicating a bullish outlook in the long term. However, the MACD indicator has generated a bearish signal with a death cross formation, and the convergence of short and long-term trends suggests the possibility of narrow consolidation or oscillation in the near term. Support levels are identified at $81.8, while resistance is seen at $89.