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Abstract: Crude oil retreated from 11-week highs as traders locked in profits. Still, WTI crude is expected to rise for a third consecutive week as supply disruptions in some African countries and a reduction in Russian exports tightened the market.

Fundamentals

After the protesters ended the demonstration, the Sharara oil field, one of the largest oil fields in Libya, resumed production, and the El Feel oil field resumed production on Sunday, which led to the second consecutive trading day's drop in oil prices.

Earlier on Monday, China released pessimistic economic data, which limited the risk rebound, as traders expected that business and consumer spending would further slow down. However, the prospect of more stimulus measures by the People's Bank of China may be enough to boost demand expectations.

Bob McNally, founder and president of Rapidan Energy Group, said that the global crude oil market faced a gap of 2.3 million barrels per day in the third quarter and 1.7 million to 1.8 million barrels per day in the second half of the year.

McNally said that this quarter will consume a lot of crude oil stocks because Russia will keep its promise to reduce 500,000 barrels of daily seaborne exports next month. The factors affecting the potential export restrictions are that Russian refiners may raise the freight rate in August before the subsidy ends in September, and the official price of Ural crude oil will exceed the price ceiling of G7 of US$60 per barrel.

API and EIA crude oil inventory data may also push up crude oil prices. A further increase in inventories may mean a downward trend in crude oil prices, as it reflects weak purchasing.

At present, WTI crude oil futures are trading around US$75.00, up about 2% this week, which has promoted today's trading action technically. The price of crude oil is encountering great resistance. However, whether from a technical or fundamental point of view, Friday's decline may be temporary. If the oil price is now consolidating below the 200-day SMA for a few days to recover some energy and then break through higher, this may not be a bad thing.

Technical Analysis

WTI crude oil recently broke through the top of the interval within the 4H timeframe, indicating that a rebound with the same height as this pattern is coming. However, if it wants to continue the upside, a further retracement is needed.

Last week, crude oil bulls tested the upper limit of around US$77.50 and are falling back to the previous resistance level, which may now serve as a support level. Fibonacci tools show that it is consistent with the 38.2% retracement near US$73.50.

A larger adjustment may still reach the 50% Fibonacci level, namely, US$72.27, close to 100 SMA; Or 61.8% Fibonacci level, at US$71.05, close to 200 SMA.

100 SMA is located above 200 SMA, indicating that the support level is more likely to hold rather than be broken. In this case, crude oil may soon return to the high point of fluctuation or higher.

Stochastic also suggests that bears are oversold or exhausted, so a move higher means that bullish momentum is building. A bit of bullish divergence can also be seen as the stochastics have made lower lows and the price has made higher lows since late June.

Finally, the Relative Strength Index has room for decline before reflecting oversold conditions, but the oscillator appears to have turned the corner and rebounded, suggesting that the bulls are eager to return. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 72.50

Target price: 80.75

Stop loss: 66.90

Deadline: 2023-08-01 23:55:00

Support: 73.75, 72.63, 69.66

Resistance: 77.11, 79.09, 80.75