Oil prices, a favorable factor for a Fed cut1. An oversupplied market
Global oil production is reaching record highs at around 105 million barrels per day. The United States delivers 22 million, ahead of Russia and Saudi Arabia (9.6 million each), while OPEC provides 27 million. On top of this comes the growth in exports from Brazil, Canada, and Argentina. This supply glut keeps oil prices in the $65–75 range despite geopolitical conflicts.
2. Cheap oil, an unexpected ally against inflation
This situation is an asset for major importing economies, particularly the United States. Moderate oil prices contribute to disinflation, easing the energy bill for households and businesses. Unlike past episodes where sharp oil price drops signaled collapsing demand, the current movement mainly stems from oversupply. It is therefore not a recession signal but rather a supportive cyclical factor.
3. Downward trend under the $65/$75 resistance
Chart signals confirm this pressure. WTI remains capped under $65, Brent under $70–75. Ichimoku indicators place prices below the weekly cloud, confirming a bearish dynamic. Elliott Wave analysis suggests an ongoing corrective move since the war in Ukraine. In this context, institutional investors are increasing short positions, putting further pressure on prices.
4. Geopolitics as an artificial floor
While fundamentals argue for a sharper decline, oil remains supported by a risk premium linked to tensions in the Middle East and Eastern Europe. This geopolitical factor is a bullish element for oil prices.
5. The Fed’s key role on September 17
The Federal Reserve’s decision at its September 17 meeting could alter oil’s trajectory. A rate cut would weaken the dollar, making dollar-denominated oil more attractive for foreign buyers. This mechanism would offer temporary support to prices despite oversupply. Conversely, maintaining the status quo would strengthen the greenback, adding downward pressure. Price adjustments will therefore largely depend on the Fed’s monetary strategy and the FOMC’s updated macroeconomic projections.
In summary, today’s oil surplus acts as a macroeconomic safety valve: it curbs inflation, supports purchasing power, and reduces production costs. This setup provides Western markets with a more stable environment while giving the Fed additional room for maneuver.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
