{x} | Trading.live

Fundamentals

During the Asian session on Thursday (June 15th), WTI crude oil oscillated higher in a narrow range and is currently trading near $68.9 per barrel. Oil prices fell sharply yesterday, which is mainly caused by expectations of the Fed's dot plot hinted at multiple rate hikes and an unexpected surge in US crude inventories. Currently, both supply and demand in the oil market have stories to tell. In terms of supply, Saudi Arabia has already showcased reducing production and shouted short, but specific actions are still lacking. The key lies in the implementation level of OPEC+. In terms of demand, the domestic economy of the world's major economies is sluggish, especially China and the US. In addition, the US policy rate should hover for a long time to fight inflation, support the dollar rally, and suppress crude oil prices. These situations are all explicit. At present, the biggest uncertainty in the market is the specific timing and quantity of strategic inventory in the US, which will be an important factor in causing market disruption in the second half of the year. In the face of declining strategic crude oil reserves month by month, the US has begun to replenish, while the intensity is less than expected. According to sources, the replenishment demand of the US this year is about 20-30 million barrels (the US Department of Energy caliber is 12 million), which is much smaller than the decline of strategic crude oil this year. The replenishment operation in the US is expected to maintain for a long time. Therefore, traders should keep a close eye on it.

News: The US will purchase about 12 million barrels of oil in 2023 to increase the Strategic Petroleum Reserve and keep looking for opportunities to buy more, the Department of Energy said. Besides, the IEA raised its forecast for oil supply in 2023 by 0.2 million b/d to 101.3 million b/d and expects a further 1 million b/d increase in 2024. Nonetheless, the IEA believes that supply will, at least in the short term, struggle to keep pace with demand, which could tighten the oil market sharply and will push oil prices higher.

Data: US crude inventories, including strategic reserves, totaled 818.81 million barrels in the week ended June 9th, 2023, up 6.03 million barrels from the previous week. US commercial crude inventories were 467.12 million barrels, up 7.91 million barrels from the previous week. Strategic crude inventories stood at 351.69 million barrels, down 1.88 million barrels from the previous week. US gasoline inventories totaled 220.92 million barrels, up 2.1 million barrels from the previous week. Commercial crude inventories were 11.56% higher than in the same period last year, which is 0.56% lower than the same period in the past five years. Gasoline inventories were 1.59% higher than the same period last year and about 7.09% lower than the same period in the past five years. Distillate inventories were 3.78% higher than in the same period last year, which is 14.50% lower than the same period last five years. Overall, the accumulation of crude oil offsets the positive IEA report to some extent.

Technical Analysis

Trading at the daily timeframe, WTI initially oscillated higher yesterday, hitting the 70.5 line, which is also the center of the previous shock box 67-74, and then retracing under pressure. In the evening, US crude oil inventories increased, and oil prices slide to adjust. However, the hawkish tone of the Fed in the early hours of the morning also weighs on oil prices. As a result, US oil closed a black body with an upper shadow. In the short term, oil prices remain in the 67-70.5 effective range unless a larger shock from supply and demand.

It is recommended that traders mainly go long at lows rather than chasing the rise during the day. Besides, it should be patiently waiting for the oil price correction and gain support before starting to go long. Aggressive traders can seize the opportunity to go long at 68-68.5. The stop loss can be placed at the 66.5 line, with the first target to take profit at 70.5 and the second target in the 71.5-72.3 range.

Trading Recommendations

Trading Direction: Long

Entry Price: 68.000

Target Price: 71.500

Stop Loss: 66.000

Support: 66.900/64.000

Resistance: 71.500/73.500