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Fundamentals

During Friday's (July 21st) Asian session, WTI crude oil jumped narrowly upward, and it is currently trading at $76.3/bbl. The growth in oil prices results from China's strong crude oil imports, as China's oil imports in June increased by nearly 50% YoY, of which the imports from Russia hit a record. In addition, data from China's General Administration of Customs showed that crude oil imports from Russia reached a record high in June. Yesterday, oil prices were suppressed by the rebound in the USDX, which fell to 74.5 once, the strong support position, followed by a rapid rebound to the 5-day SMA. Now, the oil bulls are still strong, but before  the interest rate hike resolution, the oil price will follow the USDX and maintain oscillating.

Data: U.S. initial jobless claims were 0.228 million at the week of July 15th, lower than the expected 0.224 million and the previous value of 0.237 million, the lowest level since May. After the release of the data, the market expectation of the Fed raising interest rates after July heated up. Affected by low inventories, U.S. existing home sales data for June hit the lowest since the same period in 2009, falling 3.3% MoM, the largest MoM decline since November 2022.

News: Venezuela plans to raise oil production to more than 1 million bpd by the end of 2023, the country's oil minister said. Besides, he demonstrated that exports are then expected to account for about 60% of production, with the rest for domestic consumption. The data from OPEC+ indicated that Venezuela produced 767,000 bpd of oil in June. Moreover, former Fed Chairman Ben S. Bernanke said: the Fed is expected to raise interest rates in July, possibly for the last time this cycle.

Inventory: U.S. EIA crude oil inventories for the week to July 14th are -708,000 barrels, the expected number was -2.44 million barrels, and the previous value was 5.946 million barrels. Cushing, Oklahoma crude oil stocks decreased by 2.891 million barrels, and the previous value was a decrease of 1.605 million barrels. Besides, Strategic Petroleum Reserve (SPR) inventories increased by 1 thousand barrels to 346.8 million barrels, while the Gasoline Inventories were 1.066 million barrels less, versus expectations of 1.577 million barrels less and 0.4 million barrels less previously.

Technical Analysis

Daily chart: U.S. oil shocked as expected yesterday. It surged to 76 and then quickly fell to 74.5 during the evening session, then quickly returned to 75.5 and keep oscillating narrowly. Finally, the daily chart closed positively above the 5-day and 10-day SMAs. Now, there is little change in the indicators, and the SMAs are lining downward together. Also, the MACD forms a golden cross with the opening expanding, and the bullish trend continues. However, the main issue is that WTI has been suppressed by the 200-day SMA, and there is no space for WTI if it fails to break through it.

Trading plan: WTI retraced effectively to 74.5 yesterday as expected. It rebounded later with a proper height, and there will be further upward space due to the strong WTI trend. Thus, it is important to stay careful of going short. For the above, it is better to focus on the resistance near the 200-day SMA (76.8), as investors can go short at highs if this position is not broken. About the situation below, try to buy lows and sell highs in the oscillations between 75.2-76.8. From the middle-term perspective, the USDX may keep rebounding to the next week, and WTI will retrace under pressure. Thus, it is better to find support after WTI returns to the 20-day SMA (73) and then trade with long positions in the middle term.

Trading Recommendations

Trading direction: Short

Entry price: 76.800

Target price: 74.500

Stop loss: 77.300

Support: 74.500/73.000

Resistance: 76.800/77.300