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Fundamentals

Macro: Risk appetite has declined recently, but the Q1 GDP of China was released last week, with better-than-expected growth of 4.5%. The PMI of the service industry in major countries in the United States and Europe has rebounded, and the probability of counter-seasonal contraction in consumer demand for oil commodities is small.

Demand: India's processing volume is approaching an all-time high, but it is experiencing its highest temperature in 122 years. Driven by seasonal demand, India's March crude oil processing volume has climbed to an all-time high, Reuters reported. Indian refineries processed 5.33 million b/d (about 23 million mt) in March, up 3% year-on-year and the highest since 2009. At the same time, power generation demand in the Middle East is stocked in advance, and demand in China will also launch quickly in the summer, which will support the demand in the second quarter. The downside is the suppression of demand by the recession in Europe and the United States.

Supply: Iraq and the Kurdistan region are close to an agreement, and oil exports have resumed in northern Iraq. Iraq's prime minister said oil deliveries from the Kurdistan region would resume this week. At the same time, Russia's exports in April also remained strong, and oil exports from Russia's western ports in April will hit a four-year high, which largely eases the supply pressure caused by production cuts in the short and medium term.

Inventory: Data released by the U.S. Energy Information Administration (EIA) on Wednesday showed that U.S. crude and distillate inventories have fallen, while gasoline inventories unexpectedly increased. U.S. crude inventories fell by 4.6 million barrels to 465.97 million barrels in the week ended April 14, down 1.1 million barrels expected. And gasoline inventories increased by 1.3 million barrels to 223.54 million barrels versus an expected decrease of 1.3 million barrels.

Overall: The United States may make up its reserves in the autumn, while the Asia-Pacific region is in the peak consumption season, which is expected to lead the demand growth. At the same time, attention is paid to the US Department of Energy's statement that if the WTI price is below $70 / barrel, the United States will begin to replenish war reserves in the third quarter of this year. However, the third quarter coincides with the traditional driving season in the northern hemisphere, and demand in the United States and Europe may improve in the second half of the year. In the coming quarter, domestic and foreign demand may reverse to some extent before no credit, debt risk, or significant economic recession occur overseas. Therefore, the current main trading line of oil prices is still going long at lows.

Technical Analysis

From a weekly perspective, the effective operating range of WTI is 72-8 in the past six months. After failing to effectively break the upper edge in previous times, oil prices have now retraced again to the volatile center of 77.5, and the retracement from the last high has reached 50%. Technically, the pullback has been more adequate, and the daily indicator is still weak, but the weekly indicator has begun to turn around. As MACD has come out of the golden cross and is gradually expanding, the upward resistance of oil prices is small from the perspective of the large cycle. If support can be found in the central position, then it may be able to clash with the pre-high 83.3 area this time.

Trading Recommendations

Trading Direction: Long

Entry Price: 77.500

Target Price: 83.300

Stop Loss: 74.500

Support: 75.600/72.500

Resistance: 80.000/83.300