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Fundamentals

During the Asian session on Tuesday (August 1), WTI crude oil fluctuated in the narrow range and is currently trading around 81.3 dollars per barrel. Oil prices continued to rise yesterday, mainly due to the return of crude oil to commodity fundamentals, expectations of tighter market supply, and increased demand. Saudi Arabia is said to extend its voluntary 1 million b/d program for another month, until the end of September. Saudi Arabia's output fell by 860,000 b/d in July, and OPEC's overall output fell by 840,000 b/d. In addition, US oil inventories have fallen, and the US government has begun to fill the Strategic Petroleum Reserve (SPR), which is currently at its lowest level in decades. US crude inventories fell by about 900,000 barrels in the week ended July 28. Meanwhile, global oil demand rose to a record 102.8 million b/d in July and raised its demand growth forecast for 2023 by about 550,000 b/d. Short-term support for oil prices was supported by upward revisions to growth forecasts in India and the US, covering downward revisions to Chinese consumption forecasts.

Data for investors to focus on today include Japan's unemployment rate in June, the final value of the Eurozone's Markit Manufacturing PMI in July, the final value of the UK's Markit Manufacturing PMI in July, the Eurozone's unemployment rate in June, and the final value of the US's Markit Manufacturing PMI in July.

Technical Analysis

Trading at the daily timeframe, US crude oil briefly fluctuated and fell to around 80 yesterday. During the European and American trading sessions, oil prices continued to rise, testing the resistance level at 82. Later, oil prices remained volatile at high levels and ultimately closed with a daily white body. In terms of the daily structure, US oil achieved three consecutive days of gains with the support of the MA5. However, this type of upward movement does not provide ideal trading opportunities for investors. Currently, crude oil has reached the mid-term key resistance zone of 82-83, which was previously anticipated, and has also achieved the first bullish target. Although the MACD has already released overbought signals and bearish divergence signals, the bullish sentiment for crude oil is still dominant in the short term due to excessive expectations of its rise in the market. However, this is unfavorable for investors' trades, as both long and short positions carry significant risks. It depends on the traders’ trading style choosing between chasing long with low odds and a high win rate or catching the top with a low win rate and high odds. If oil prices continue to rise sharply in the near future and test the key resistance at 83, there is still a space of 1-2 dollars upwards. However, if prices pull back, the downside may test the level of 78, creating a space of 3-4 dollars downwards. Currently, the trend box of oil prices is still in an upward trend, but it is near the upper boundary of the box. Aggressive traders can still seize the key resistance level with a small position and tight stop loss, and attempt short-term short positions.

Aggressive investors can try to go short near 82.5 with a small position. The stop loss is 83 and the target below should focus on MA5 at 80.3, where you can reduce positions partially and move your stop loss to break even. The remaining positions should target the MA10 at 78.7. In the short term, it is still necessary to wait for a certain amount of downward correction in US oil, which means considering long positions only when oil prices have at least pulled back to the MA10, which is the lower boundary of the trend box.

Trading Recommendations

Trading Direction: Short

Entry Price: 82.800

Target Price: 78.500

Stop Loss: 83.300

Support: 80.500/78.500

Resistance: 82.500/83.500