Chapter 35 09/12 WTI: It Has to Be Pushed Up as Market Doesn't Have Much Room for Retracement
Abstract: Before the OPEC monthly report and the International Energy Agency (IEA) report, oil prices rose slightly, approaching the highest level this year. This report is expected to give people a further understanding of the market balance.
Fundamentals
On Monday, the international oil price weakened slightly, but this situation may not last long. In the next few days, market observers from OPEC, the International Energy Agency, and the U.S. government will make a lot of comments, which will open the prelude to the impact of Saudi Arabia and Russia's extended production cuts on the global oil balance in the fourth quarter and early 2024.
In the last outlook report, IEA emphasized the threat of a sharp decline in inventory, record demand, and rising oil prices. It is expected that the information it will release this week and the information of the other two agencies may have a more urgent tone.
At present, the fundamental factors that have pushed up the price of crude oil since June are very clear. Russia and Saudi Arabia are still restricting supply, while the demand prospects of some large importing countries seem to be improving; In addition, the USD recorded its biggest decline in the past two months on Monday, which also made the commodities denominated in USD more attractive to most buyers. However, we still believe that the current upward trend of oil prices (although overbought) has not been exhausted. Crude oil needs new clues to guide the direction. (Inflation report could be the best catalyst)
The U.S. consumer price index report for August will be released on Wednesday, and the strong results may be enough to boost the Fed's hope of tightening policy even after September. If so, the USD may rise sharply again, forcing crude oil and other commodities to fall.
On the other hand, depressed inflation data may stimulate the profit-taking of the earlier rise of the USD and benefit crude oil. The unexpected decline in PPI and retail sales reports may also restore the recent gains of the USD.
Finally, the recent positive trend of oil prices continues to keep the market highly concerned, because it is difficult for bears to find flaws to convince the current bull market. For example, despite the slow economic activity in China, WTI crude oil remained above US$87.00. This sends a very strong signal to the bears that now is not the time to fly against the wind.
Technical Analysis
WTI crude oil has formed a higher low point, found resistance around US$88.00, and formed an upward triangle in the 1H timeframe. If the price rebounds from the support level again, the market may look to the top of the triangle.
Continued bullish momentum may stimulate bulls to break through, which may push crude oil up to the same height as the boundary of such a timeframe. On the other hand, the return of risk aversion may curb the rally and push crude oil prices back to the support level of US$86.20 at the lower edge of the triangle.
Overall, the 100 SMA is higher than the 200 SMA, indicating that the path of least resistance is to the upside, or that the uptrend is likely to continue accelerating. On the other hand, the gap between the indicators is narrowing, reflecting the weakening of the bullish momentum.
However, the stochastic indicator is really moving higher, suggesting that the bulls are in control and that the oscillator has room to go higher before reflecting overbought conditions or bulls' fatigue. Similarly, the Relative Strength Index is moving up; therefore, the price could follow suit and allow the bulls to continue to gain the upper hand.
Finally, once again, there is not much room for retracement in the market, and it is recommended to buy the dips.
Trading Recommendations
Trading direction: Long
Entry price: 87.20, 86.81, 86.20
Target price: 90.90
Stop loss: 84.20
Deadline: 2023-09-26 23:55:00
Support: 86.89, 86.52, 86.22, 85.63
Resistance: 87.33, 88.43, 90.24, 90.90
