The crude oil market was rather muted on Thursday due to the US Thanksgiving celebrations. However, USO ETF extended its previous gains, having bounced off its one-month low. Beyond the holiday-triggered drop in participation, the market is reacting to mixed signals. From hopes of a peace plan to end the Russia-Ukraine war to the OPEC+ meeting and improved risk sentiment, investors are taking it all in.
Crude oil prices respond to differing market drivers
On the one hand, the improved risk sentiment has offered steady support to crude oil prices; holding WTI futures above $61 a barrel despite the recent pullback. The fear & greed index indicates that investors remain cautious of the health of top economies.
Indeed, fear remains the key emotion in the broader financial markets. However, it has improved from last week’s extreme fear of 7 to 18 on Thursday. With the improved risk sentiment, Dow Jones and the tech-heavy Nasdaq 100 index extended gains to a two-week high as the US stock market recovers from the AI sell-off. At the same time, gold price eased on its rebound despite heightened bets on a 25-basis-point rate cut by the Fed before the year ends.
Nonetheless, hopes that a peace deal to end the Russia-Ukraine war will go through have curbed crude oil price gains. On Thursday, President Putin asserted that the draft peace plan discussed by Ukraine and the United States could form the basis of a future agreement to end the prolonged war.
As investors eye the progress of the peace talks, the risk premium priced in the crude oil prices appears to have lessened. This is based on the expectations of eased US sanctions on Russian exports.
Russia is the third-largest oil producer in the world after Saudi Arabia and the United States. The free flow of the country’s supply to a market that is already concerned about oversupply is set to exert significant pressure on crude oil prices.
Amid the price vulnerability, investors are keen on the OPEC+ meeting slated for the weekend. The group is expected to maintain the current output levels in reaction to the heightened oversupply concerns.
USO oil price technical analysis
The USO ETF edged higher on Thursday after dropping to a one-month low in the previous session. Even with the pullback, the bulls successfully defended the support at $68, which has been steady since late October.
The ETF is now trading sideways as the Thanksgiving celebrations lessen market participation. Beyond the holiday, the market is also eyeing the OPEC+ meeting on Sunday and the direction of the peace plan to end the Russia-Ukraine war. As such, USO oil price will likely remain range-bound in the ensuing sessions.
More specifically, the range between $68.93 and $71.60 will be worth watching. This thesis will be valid for as long as the prices hold steady above the crucial support of $68.
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