{x} | Trading.live

Abstract: There are signs that the supply of crude oil is rebounding, while concerns about the demand of China, the largest importer, persist, and oil prices remain under pressure.

Fundamentals

The rise of WTI crude oil since late June has slowed down in the past two weeks, and futures prices have returned to the level at the beginning of the year. Efforts by Saudi Arabia and Russia, important countries of the OPEC+ Group, to cut production have led to market tightening. However, the demand outlook in China is clouded, and there are signs that the U.S. interest rates need to remain high for a longer time to curb inflation.

We believe that whether it is recession concerns, economic headwinds, or demand concerns, OPEC+'s supply management strategy has successfully addressed these concerns. Although the balance between supply and demand of crude oil may deteriorate obviously, there is no reason to believe that global crude oil consumption will be close to stagnation, let alone below supply.

On the market side, WTI crude oil may get clues from the inventory data of API and EIA released later this week; Another large-scale reduction will reassure bulls, indicating that demand is still high.

Other market catalysts that may affect sentiment and crude oil prices include PMI data released by major economies, which may bring new insights into business activities. Strong data may continue to push up crude oil prices. On the other hand, a weak result may mean a downward trend in crude oil prices, because it may indicate a slowdown in growth.

Technical Analysis

As WTI crude oil price forms a head-shoulder pattern in the 4H timeframe, the pattern may be reversed from the upward trend. Despite this, the current price has not yet fallen below the neckline of about US$80.00.

If this happens, the price of crude oil could fall with a retracement of the same height as the chart pattern, i.e. around US$4.00. However, the technical indicators look mixed.

100 SMA is still above 200 SMA, indicating that the path of least resistance is upward, or the support is more likely to hold rather than be broken. 200 SMA is close to the neckline, which also enhances its support strength.

If the bottom remains unchanged, it may rebound to the area around US$82.00 again. On the other hand, if the support collapses, it will be confirmed that the reversal is coming.

The stochastic indicator is lower, confirming that the bears have the upper hand, but the oscillator is approaching the oversold zone, suggesting that the bears are about to run out of steam. However, the Relative Strength Index has more room to fall; therefore, crude oil prices could follow the grip of the bears. It is recommended to set the foundation.

Trading Recommendations

Trading direction: Long

Entry price: 79.00

Target price: 83.30

Stop loss: 76.30

Deadline: 2023-09-05 23:55:00

Support: 79.51, 79.00, 78.49

Resistance: 80.29, 81.66, 83.30