18th September 2019
Market uncertainty in the aftermath of the attacks on the Abqaiq oil facility in Saudi Arabia spilt on to London-listed stocks once again. Stocks mirrored a steady oil price for much of the day, as investors awaited clarity from the Gulf kingdom as to how long it would take for it to rebuild its regular output capacity, and – perhaps more urgently – who they believed was to blame for the attacks.
In the midafternoon, a Reuters report said production capacity in the Gulf nation would be back to normal in two to three weeks. The prospect of such a brief delay before supplies normalise dragged down the oil price, which had been steady during most of European trading up until that point.
Looking at the bigger picture, Brent crude is still standing at the levels it reached amid fairly bullish sentiment in July, but a longer-term drop means it still remains some way off recent highs.
The fall sliced off gains for Royal Dutch Shell and BP, which had led risers earlier in the day on the back of the rising oil price. Shell managed to hold on to some gains, with its “B” shares closing 9.5p up at £23.32. BP slid 7.6p to 517p. The FTSE 100 as a whole was pancake-flat, ending in the red by the narrowest of margins – down 1.01 point, or 0.01pc, to 7,320.4. The 7291 support level held well and the longs on the FTSE 100 and the Dax both yielded a decent tally yesterday. I am still running some stake on both and will continue to trail the stops.
Moving On
Saudi Arabia has restored almost half the output lost at its Abqaiq oil facility after an attack on the plant at the weekend, and expects to be back to pre-strike processing levels by the end of the month. Oil prices plunged on the news, with WTI futures falling the most since August 1. Nonetheless, progress is slower than was initially expected and crude prices remain elevated as traders factor in higher risks for Saudi supply. Even as Aramco fixes the damage at Abqaiq, the possibility of further escalation of conflict in the Middle East hangs over the market. Here’s what you need to know about the conflicts that led to the attack.
Market Open
Asian equity futures are higher after U.S. stocks eked out a gain and Treasuries rallied Tuesday, a day before the Federal Reserve is expected to cut interest rates. Crude gave back some of Monday’s 15% surge as Saudi officials said they had restored just under half the output lost at the Abqaiq plant, one of the world’s biggest oil facilities. Ten-year Treasury yields fell to 1.8% and the dollar weakened after the Federal Reserve took action to calm money markets, injecting billions in cash to quell a surge in short-term rates that was threatening to drive up borrowing costs for companies and consumers.
FTSE 100 Trading Signals, Forecast and Prediction
After yesterday’s nice gains with the longs I think we might be a bit weaker today. The supports held well yesterday but the general bias is down in the short term. We also have the Fed this evening (7pm UK time) with a forecasted cut of another 25 basis points (a follow up to July’s) – as such if we don’t get that then we may well see a drop in markets. Powell’s press conference is at 19:30 so that may well give a few future clues as well.
We have the daily pivot for initial resistance at the 7320 area, however we may well see a push towards the 7345 R1 and 2 hour resistance area. If we do then a short here looks good, as it may coincide with a “buy the rumour, sell the news” ahead of the Fed at 7. The bulls will be keen to keep the price above the 7300 level though, as a drop down would likely break yesterdays low and test the 7278 25ema on the daily. If this holds then we should see a decent rise, however the S&P still looks like it might drop down to test the 2960 level – and that would likely weigh on the FTSE 100 a bit too. Oil prices have stabilised a bit with the fallout of the attacks maybe not as bad as initially feared, and cable has also levelled off at the 12500 level. Till we get the next Brexit related shambles anyway.
Below the 7280 level then a drop down to the daily supports at 7240ish is probably going to pan out, so be mindful of that. We also have quadruple witching on Friday so that is likely to be volatile.
If the bulls were to break above the 7340 level then we still may see 7400 again. The daily Raff channels are still heading up so its not all doom and gloom currently and the longs yesterday did well. I am still cautiously bullish for the moment, but watching 7340/50 closely.
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