Oil Sitting On Key Support – What to Watch This Week

Oil Drops Despite Middle East ConflictOil prices are coming under pressure across early trading on Monday, despite an intensification of the Israel-Hamas war. Israel stepped up its advances into Gaza over the weekend with increased land and air campaigns. However, for now markets appear to be looking beyond the reports on the view that the conflict looks likely to remain contained. Although this view is keeping oil prices lower for now, the situation remains highly volatile and any sign of the conflict spilling over into a wider Middle East conflict should see oil prices firmly bid.  Chinese Manufacturing & FOMCAway from the news flow out of the Middle East, oil traders will also be keeping an eye on the Fed this week and the latest Chinese manufacturing data. With Chinese manufacturing having recovered into positive territory over the prior month, a further positive reading should help drive oil prices higher on improved demand expectations. However, if the reading slips back below the neutral mark, the sell off in oil will likely be exacerbated. For the Fed, any subsequent USD rally on the back of the meeting will be negative for oil flows near-term. As such, there is plenty to keep an eye on this week as well as the latest EIA inventories update due ahead of the Fed on Wednesday.Technical ViewsCrudeFollowing the breakdown below the bull channel off the YTD lows, price has since stalled into support at the 82.59 level. This is a key technical area for the market and any break below will be firmly bearish, turning focus to the 77.64 level next in line with bearish momentum studies readings.