{x} | Trading.live

Fundamentals

WTI crude oil opened higher and moved lower during the Asian session on Monday (June 5th), trading now near $73.10/barrel. Besides, benefiting from the OPEC+ agreement to extend production cuts to 2024 over the weekend, Saudi Arabia pledged to significantly cut production in July. In addition, Biden signed the debt ceiling bill, and the US avoided a debt default and boosted oil prices. Meanwhile, the U.S. employment data released on Friday night showed an unexpectedly large increase in jobs, but the unemployment rate rose to a 7-month high, showing that the labor market is losing momentum, jobs are increasing, and employment intentions are declining, which is also reflected in the slowdown in payroll growth in May, which may help to ease the inflation.

Focus on today: U.S. April's revised monthly rate for durable goods orders, U.S. April's monthly factory orders, and U.S. May's ISM non-manufacturing PMI. 

Data: the U.S. Bureau of Labor Statistics released Nonfarm Payrolls data, announcing that Nonfarm Payrolls increased by 339,000 in May, more than the expected increase of 190,000. However, the unemployment rate rose from a 53-year low of 3.4% in April to 3.7%, a new high since October 2022, the largest increase since 2010 (excluding the COVID-19 pandemic period). 

News: OPEC+ agreed to extend its production cut deal to 2024 to boost the oil prices, and Saudi Arabia will cut output sharply in July. Saudi Arabia's energy ministry said the country's production will plunge to 9 million bpd in July from about 10 million bpd in May, the biggest drop in years. In addition to extending the existing 3.66 million bpd production cut, OPEC+ on Sunday agreed to cut its overall production target by another 1.4 million bpd from the current target to 40.46 million bpd from January 2024. 

In general, it is difficult for the oil market to strengthen or weaken unilaterally from the fundamentals. Last week, $67/barrel was highlighted as a great opportunity to go long on crude, and the market has responded. Over the weekend, OPEC+ extended the production cut agreement to 2024 and Saudi Arabia's expanding production cuts of 1 million barrels is also enough to express the determination to maintain the balance of oil prices, which means that the key variable in the oil market is the demand side instead of the supply side, the recovery of the global economy. Moreover, the current U.S. debt ceiling bill has been passed, and it the crisis seems to have been passed. Nonetheless, the current factors affecting oil prices are complex, a factor often links multiple influencing factors, while the core rising factors should be determined by the demand growth, production cuts are only short-term support for oil prices. Now, the current oil prices also reached the key resistance level near $74 but failed several times to effectively break through it. This time, there is a rebound opportunity, but investors should not be overly optimistic. 

Technical Analysis 

Daily chart: WTI has rebounded for two consecutive days, turning the direction of which with the least resistance into bulls. At present, WTI stands above the 5-day, 10-day, and 20-day SMAs, while the MACD shows a golden cross, indicating an initial bullish pattern. Nonetheless, WTI opened today with a doji star, exhibiting long-lower-upper-shadow patterns. Technically, the ascending momentum is fading and WTI may be short covered. The initial resistance will be near $74.3 above and the initial support will be $72.3 below.  

Trading recommendations about the daily chart: do not chase and buy at highs but wait for short selling from rebounds. The short-selling price range will be $73.8-$74.2 with the stop-loss at $75. If WTI drops to $72.3, try to take profits partially and set the remaining positions for taking profits at lower levels.

Trading Recommendations

Trading direction: Short

Entry price: 74.000

Target price: 72.000

Stop loss: 76.000

Support: 72.300/70.000

Resistance: 74.800/75.600