Crude Oil Prices Look Past Russia-Ukraine Tensions as WTI Awaits US Inflation Report

Crude Oil, WTI, Fed, Russia, Ukraine, US CPI – Talking Points:

• WTI crude oil prices sink 2.5% on Monday, falling alongside Wall Street
• Oil focused on global growth slowdown instead of Russia-Ukraine woes
• Geopolitics remains a wildcard before US CPI data strikes on Thursday

WTI crude oil prices fell about 2.5 percent on Monday, the worst single-day performance since September 26th. This is despite an impressive almost 17% rally last week. The latter was triggered by plans from OPEC+ to reduce output in the coming months amid the decline in energy prices since earlier this year, opening the door to reduced supply.

Growth-linked crude oil was focusing on concerns about global GDP to start off the new trading week. Federal Reserve Vice Chair Lael Brainard spoke, reiterating the central bank’s push to fight the highest inflation in 40 years. She also highlighted the risks of easing prematurely, referencing the Fed’s actions back in the 1970s. Chicago Fed President Charles Evans also spoke, offering a similar message.

The sentiment-linked commodity was also tracking a decline on Wall Street. Hawkish Fed commentary, especially in the wake of last week’s solid jobs report, continued to raise concerns about a global recession. The tech-heavy Nasdaq 100 sank over one percent, also feeling the pain of plans from the White House to continue restricting China’s access to US technology.

Escalating tensions between Ukraine and Russia also seemed to do little to bolster crude oil prices. According to Bloomberg, Russia’s recent missile strikes on Kyiv were the “most intense barrage since the first days of the invasion”. This followed Russian President Vladimir Putin accusing Ukraine of blowing up a key bridge between Crimea and Russia over the weekend.

Geopolitics remains a wildcard for the commodity as WTI awaits Thursday’s US inflation report. Headline CPI is seen clocking in at 8.1% y/y in September from 8.3% prior. The core reading is estimated to rise to 6.5% y/y from 6.3%. The latter is not what the Fed wants to see. Another upside surprise in the data could easily bolster volatility in financial markets, denting crude oil prices.

Crude Oil Technical Analysis – Daily Chart

WTI crude oil prices fell back to the 90.37 inflection point over the past 24 hours. Immediate resistance remains as the 38.2% Fibonacci retracement at 94.37. Prices are also above the 50-day Simple Moving Average (SMA), as well as the near-term rising support line from late September. A breakout under the latter two could hint at downtrend resumption. Otherwise, the August high is at 97.65.

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter