Oil Market Poised for Choppy Trading After Saudi Attacks, But Janney Sees Crude as Range-Bound

3:55PM ET 9/17/2019 MT Newswires
The oil market is expected to see more choppy trading after spiking higher in the wake of attacks on facilities in Saudi Arabia, but prices for the commodity are expected to remain range-bound on the longer term, Janney Montgomery Scott said in a note Tuesday.

The investment advisory firm's technical models are still showing that commodity and energy prices are expected to continue to underperform stock markets on a relative basis, said Dan Wantrobski, an analyst with Janney.

"This would indicate that investors should not necessarily be in a rush to overweight the energy sector anytime soon in our opinion," he said in the note.

Crude prices spiked on Monday before pulling lower Tuesday amid reports that Saudi Arabia might not take as long as previously expected to return oil output levels to normal. Saudi exporters will likely lean on their reserves to meet contractual obligations after the drone attacks that took out about half the kingdom's capacity, according to oil analytics firm Vortexa.

West Texas Intermediate, the US standard, sank 6.2% to trade at $59.01 a barrel late Tuesday, while Brent, the international crude benchmark, skidded 7.1% to $64.12 a barrel.

Crude oil "remains range-bound/basing overall in our view," Janney's Wantrobski said. Trading is set to remain choppy for the NYMEX continuous contract, with initial support near $50 a barrel, he said.

"The next breakout from here that would generate a bullish signal on oil prices would be a rally north of $65," he said. "This would break the commodity out the range it has been trading in for most of 2019."