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Crude Oil Price Analysis for October 20, 2017

Crude oil price traded under pressure on Thursday following a report from Chinese authorities that showed that GDP declined from the prior quarter. The move prompted a selloff in riskier assets, which weighed on crude oil prices. This comes on the heels of Wednesday’s larger than expected decline in crude oil inventories, which helped price rise.

Technicals

Crude oil dropped but was able to hold support levels near the 10-day moving average at 51.03. A close below this level would lead to a test of the October lows at 49.10. Resistance on crude oil prices is seen near a downward sloping trend line that comes in near 53.10. Momentum on crude oil prices is neutral as the MACD (moving average convergence divergence) index prints near the zero-index level with a flat trajectory on the MACD histogram which points to consolidation.

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Norway Sees Oil Demand Increasing

A Norwegian official acknowledged OPEC’s progress in helping oil’s fundamentals move closer to balance, and said that for Norway, the most immediate threat was the lack of any significant new discoveries to ensure stable oil supply for the near term. In this context, the long-term trends in oil and fuel demand must take a back seat.

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State-owned energy major Statoil has been on the hunt for new discoveries for a while now as oil prices rebounded from their trough last year, but it has reported disappointing results at home, its Arctic drilling campaign this year produced no meaningful results and the company said it will be back next summer to drill more.

At the same time, there are large oilfields slated to start pumping crude in the next few years. Johan Sverdrup, which is estimated to hold between 1.9 billion and 3 billion barrels of oil equivalents, is scheduled to start production in 2019. Johan Castberg, with proven reserves of some 400-600 million barrels, should start production in 2022.

Chinese GDP Dips

The Chinese National Bureau of Statistics said its third-quarter GDP growth was 6.8% compared to the same period last year, a day after President Xi Jinping made big promises for the country’s economic future during a pivotal leadership meeting. Expectations had forecast China to post a modest drop from the second quarter, with GDP to have grown 6.9% percent in the July-September period due to the government’s efforts to cool the property market and cut debt risks. China’s statistics bureau said Thursday that September retail sales grew 10.3% fom a year ago, while final consumption accounts for 64.5% of GDP growth in the first three quarters. On Monday, the People’s Bank of China quoted its governor, Zhou Xiaochuan, as saying the world’s second-largest economy is likely to post growth of 7% in the second half of the year thanks to rapid household spending. First half GDP growth was 6.9%.

Jobless Claims Dropped

U.S. initial jobless claims dropped 22k to 222k in the October 14 week following the 14k drop to 244k in the first week of October (revised form 243k). That brought the 4-week average to 248.25k versus the prior 257.75k which was revised from 257.5k. Continuing claims declined 16k to 1,888k in the October 7 week following the 17k drop to 1,904k which was revised from 1,889k. Claims are still adjusting to the effects of the hurricanes. The BLS said the Virgin Islands estimated its numbers.

Philly Fed Index Rose

U.S. Philly Fed index rose 4.1 points to 27.9 in October following the 4.9 increase to 23.8 in September. That’s almost triple the 11.1 print from a year ago. The employment component surged to 30.6 following the 3.5 point dip to 6.6, with the workweek at 19.4 from the 6.9 tick slip to 11.9. New orders slid to 19.6 after jumping 9.1 points to 29.5 previously. Prices paid rose to 38.1 following the 13.3 climb to 34.4 in September, while prices received fell to 14.2 from 22.8. The 6-month general business activity index declined to 46.4 following the 12.9 climb to 55.2, with the future employment gauge at 38.7 from 30.1, new orders at 43.7 from 56.9, prices paid at 60.2 from 46.2, and prices received at 41.1 from 31.7. The 6-month capital expenditures index slipped to 37.7 from 39.0.

This article was originally posted on FX Empire

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