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Fundamentals

During the Asian session on Tuesday (May 30), WTI crude oil fluctuated to the downside, currently trading around $72.4 / barrel. Oil prices fluctuated to the downside in quiet trading. Despite the preliminary agreement reached in the US debt ceiling negotiations, Republican hardliners opposed it, and differences between the two parties remained, adding to the variables in Congress. Coupled with Iran's full return to the oil market after the lifting of sanctions, and the rising probability of the Federal Reserve's interest rate hike in June, the growth in oil prices may be limited.

Inventories: Total U.S. crude oil inventories were 813 million barrels in the week ended May 19, 2023, down 14.088 million barrels from the previous week. Commercial crude inventories were 455 million barrels, down 12.456 million barrels from the previous week. And strategic crude oil inventories were 358 million barrels, down 1.632 million barrels from the previous week.

Supply: U.S. crude oil production was 12.3 million b/d for the week ended May 19, 2023, up 100,000 b/d from the previous week. Rig sector: The number of active rigs in the United States was 570 in the week ended May 26, 2023, down 5 from last week.

Demand: As of May 19, 2023, U.S. refinery crude oil processing volume was 16.069 million b/d, an increase of 79,000 b/d from the previous week, and the operating rate of crude oil in US refineries was 91.70%, down 0.3% from the previous week.

News: OPEC Secretary-General Al Ghais said in an interview on Monday that OPEC forecasts global oil demand to grow in 2023. With the summer tourism season just around the corner, demand for jet fuel and gasoline will pick up. At the same time, as China continues to open up and inflation and U.S. debt issues are resolved, demand for other products will also improve.

Geographic: The conflict between the Kurdistan local government and Baghdad has heightened risks to oil supplies in northern Iraq. Iraq says Turkey should not allow Kurdish oil exports through the Iraq-Turkey pipeline and Ceyhan without the approval of the Iraqi federal government. In response, Turkey closed the pipeline to Ceyhan, cutting off the flow of Kurdistan oil on the market, which is still difficult to recover.

Overall: Over the weekend, a preliminary bipartisan agreement on the debt ceiling in the United States ended months of standoff. The risk aversion of the market has been temporarily eased. However, the deal still has to pass in Congress, with the current bipartisan divide still remaining, which adds more uncertainty. In addition, as the US economy has proven resilient, inflation will be more persistent than expected. It means that high-interest rates may be maintained for a longer period, which is also not friendly to oil prices. However, the macro bearish does not change the positive supply and demand side at all. At present, oil prices can hardly get out of the smooth market, with the upper and lower space being limited, which is suitable for going short at lows. Therefore, traders are advised to take swing trading in the 71-74 range, buying low and selling high.

Technical Analysis

Trading at the daily timeframe, WTI closed yesterday with a crosshair, maintaining a tight consolidation over last week's range. The price first oscillated higher to test the 73.9 line and fell back during the European session to adjust, retreating to the 72 line. Prices rebounded again in late trading and returned to fluctuate around 73. The daily chart closed with a long lower shadow, repeatedly switching around the moving average, which has broken below the MA10 yesterday and then retraced to near the MA5. As the direction of the short-term trend is still uncertain, the trend is difficult to extend. Short-term prices may keep fluctuating in the 71-74 range.

Trading Recommendations

Trading Direction: Long

Entry Price: 71.500

Target Price: 80.000

Stop Loss: 67.000

Support: 71.000/70.000

Resistance: 76.500/80.000