OIL - Potential up move before a bigger drop
Fundamental Analysis
WTI remains stable as global interest rates are decided, showing signs of a potential increase for the week. The People's Bank of China's decision to lower rates aims to boost economic growth and improve the outlook for oil. Currently, WTI is trading at $71.25, a slight increase from before.
Despite elevated prices worldwide and a slowing economy, major central banks, such as the European Central Bank (ECB) and the Federal Reserve (Fed), have chosen to keep rates unchanged. The ECB raised rates to a 22-year high, while the Fed decided to skip its June meeting but revised its peak rates upward, surpassing the 5.50% threshold. Although this initially strengthened the US dollar, WTI prices were affected by Jerome Powell's neutral comments, causing the gains to diminish.
In contrast to the ECB and the Fed, the People's Bank of China reduced rates due to the slower-than-expected recovery of the Chinese economy. Recent data suggests a loss of momentum, which impacted the rise in oil prices, especially after Saudi Arabia announced a cut in its crude oil output starting in July.
Growing demand in China has supported oil prices, with refinery output reaching its second-highest level on record. The CEO of Kuwait Petroleum Corp estimates that Chinese oil demand will continue to increase in the second half of the year.
It's important to note that the voluntary cuts in crude oil production by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will limit supply in the near future. Additionally, the US dollar has weakened following the Fed's decision to keep rates unchanged, which also contributes to favourable conditions for WTI prices.
Technical Analysis
From a technical perspective, WTI is currently moving horizontally on the charts, staying within the range of approximately $63.50 to $68.00 throughout the year. Our long term view is bearish, but right now we would expect a move up to $76 Price range before we could see another bigger drop which would most likely break the $63 price level.
WTI remains stable as global interest rates are decided, showing signs of a potential increase for the week. The People's Bank of China's decision to lower rates aims to boost economic growth and improve the outlook for oil. Currently, WTI is trading at $71.25, a slight increase from before.
Despite elevated prices worldwide and a slowing economy, major central banks, such as the European Central Bank (ECB) and the Federal Reserve (Fed), have chosen to keep rates unchanged. The ECB raised rates to a 22-year high, while the Fed decided to skip its June meeting but revised its peak rates upward, surpassing the 5.50% threshold. Although this initially strengthened the US dollar, WTI prices were affected by Jerome Powell's neutral comments, causing the gains to diminish.
In contrast to the ECB and the Fed, the People's Bank of China reduced rates due to the slower-than-expected recovery of the Chinese economy. Recent data suggests a loss of momentum, which impacted the rise in oil prices, especially after Saudi Arabia announced a cut in its crude oil output starting in July.
Growing demand in China has supported oil prices, with refinery output reaching its second-highest level on record. The CEO of Kuwait Petroleum Corp estimates that Chinese oil demand will continue to increase in the second half of the year.
It's important to note that the voluntary cuts in crude oil production by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will limit supply in the near future. Additionally, the US dollar has weakened following the Fed's decision to keep rates unchanged, which also contributes to favourable conditions for WTI prices.
Technical Analysis
From a technical perspective, WTI is currently moving horizontally on the charts, staying within the range of approximately $63.50 to $68.00 throughout the year. Our long term view is bearish, but right now we would expect a move up to $76 Price range before we could see another bigger drop which would most likely break the $63 price level.
