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Summary: Oil prices have stabilized after three straight days of declines due to market concerns about China's economy and a possible tightening of monetary policy in the U.S. Despite policymakers' vows of support, the focus has shifted to worries about the post-pandemic recovery of China, the world's largest importer. This has dampened interest in risk assets, including commodities.

Fundamentals

Last week, international oil prices experienced their first weekly decline since June, ending a seven-week upward trend. September WTI crude oil futures closed at $81.25 per barrel, marking a 2.33% decline for the week. During this period, crude oil prices engaged in a battle between downward support and the 10-week moving average, continuing the previous day's breakout above the resistance line from the preceding week's drop.

It's worth noting that China has implemented multiple measures through the People's Bank of China and fiscal policies to keep energy benchmarks resilient in the near term.

Last week, heightened concerns about China's debt crisis and real estate issues fueled risk aversion, dragging down oil prices. Additionally, China's housing price index dropped from 0% to -0.1% in July. This report increased worries about a potential real estate collapse in the country. Currently, market participants will continue to monitor headlines regarding China's economic challenges, and further evidence of China's economic deterioration could put pressure on the oil market.

Meanwhile, risk sentiment remains a primary driver of oil prices. Later this week, the focus will be on global Purchasing Managers' Index (PMI) data and Fed Chairman Powell's speech at the Jackson Hole central banking conference. These events could have significant impacts on USD-denominated oil prices.

Looking ahead, WTI crude is expected to fluctuate within the $72.00-$89.00 range until the fourth quarter of this year. Despite market volatility caused by reduced Russian crude exports and Saudi Arabian production cuts, we anticipate WTI crude will not break out of this range at present. Last week, WTI crude faced substantial resistance around $84.00, and prevailing macro pressures are likely to sustain this resistance level long-term. However, if our predictions prove incorrect, we believe WTI crude may continue to consolidate in a higher range, with the next resistance levels at $89.27 and $92.89.

Technical Analysis

WTI crude oil has achieved slight gains in the early trading of the new week, currently trading around $81.40. During this process, the crude oil price is engaging with the 10-week SMA, continuing the previous day's breakout above the resistance line from the preceding week's drop. Simultaneously, the Relative Strength Index (RSI) is strengthening without being overbought, adding credibility to further bullish sentiment. Therefore, WTI crude oil is expected to surpass the 10-week SMA and reach the psychological level of $84.00.

However, the bearish signals from the MACD indicator don't seem to have entirely relinquished their downward momentum, and the possibility of consolidating the previous correction cannot be ruled out ahead of significant data and events.

The upward-slanting resistance line since January (currently at $84.50) seems to pose a challenging obstacle for the bearish side of crude oil. Conversely, for a downside breakthrough to turn the resistance around $79.90 into support, validation from the 200-day SMA support at $76.00 is needed to give the bears control.

On the whole, the current momentum favors bullish holders, and a sustained upward trend could drive oil prices up to $82.00 or even extend to the previous top near $84.00. In terms of trading strategy, buying on dips is recommended.

Trading Recommendations

Trading Direction: Long

Entry Price: 81.40

Target Price: 84.32

Stop Loss: 78.00

Valid Until: 2023-09-04 23:55:00

Support: 80.89, 79.00, 78.14

Resistance: 81.50, 82.36, 83.33