Interactive Investor

Commodities outlook: Crucial price points for oil and copper

After another packed week of economic and political turmoil, we look at the impact on prices.

15th November 2019 12:16

Rajan Dhall from interactive investor

After another packed week of economic and political turmoil, we look at the impact on prices.

The outlook for commodities has been heavily weighted toward the US-China trade deal of late. Now, China says that the trade war which started with tariffs should end with their removal. 

The tone between the two economic superpowers is a positive one still. As some US representatives confirmed yesterday, the two nations are having a dialogue on a daily basis to push the talks forward before Donald Trump and China's Xi Jinping meet in London in early December. 

On the oil front, West Texas Intermediate (WTI) and Brent crude slumped after OPEC said it is not willing to increase production cuts, although Saudi Arabia and Russia said they would prefer if all the OPEC nations would adhere to the current ones. 

Some analysts suggest this is due to the upcoming Saudi Aramco IPO. If the Saudi's keep cutting production, it will make the share placement less valuable. Moving on to the API's and Department of Energy stats, which were mixed this week. The main take away from both reports was the fact that US oil production has reached record levels once again. 

Looking at the daily futures chart below, the price has been making higher highs and higher lows, but the $57.87 per barrel level has been tough resistance to crack. On the lower timeframes, the picture looks worse as $57.50 per barrel has been rejected five times in the last week. The key levels to look out for are a break of $58 per barrel and on the downside a break of $56.26 per barrel would confirm the bearish tone.

Source: TradingView Past performance is not a guide to future performance

Copper has the trade war issues to deal with but, on a micro level, the political situation in Chile has worsened. The Chilean Pesos has fallen to new all-time lows and the country is in serious trouble. 

The copper price has now taken a drop after some very poor Chinese data this week. There have been rumours of another Chinese stimulus package and, if this is confirmed, we could see another rally. Once again, the main news will be the US-China trade deal mentioned above.

Looking at the copper Comex futures daily chart now, last time out we highlighted the resistance level and it has failed to break. This week we have seen a dramatic fall but the $2.72 per pound level now remains key. If we see a break higher past that level there has to be a good reason and good volume backing the move. On the downside, we are far away from the trendline support and $2.46 per pound horizontal support zone. So, for now, the price may consolidate until any news is confirmed.

Source: TradingView Past performance is not a guide to future performance

Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.

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