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Fundamentals

During the Asian session on Wednesday (June 14th), WTI crude oil fluctuated in a narrow range, currently trading around $69.5 / barrel.

Oil prices climbed and rebounded nearly 3% yesterday, as US inflation data reinforced the expectation of a pause in the rate hikes by the Fed, leading to worries that Saudi Arabia's production cuts will sharply tighten the oil market in the summer. In addition, the favorable interest rate cuts in China, OPEC's upward revision of China's demand growth forecast, and geopolitical tensions yesterday supported a strong rebound in oil prices, which have now reached the 70 resistance mark. Ahead of the Fed's June interest rate decision, uncertainty still remains about the trend of oil prices, which are biased toward bulls.

News: In the second half of 2023, the demand for global oil is expected to grow by 2.35 million b/d or 2.4% YoY, essentially unchanged from the 2.33 million b/d forecast last month, according to OPEC's monthly report. Notably, OPEC warned of a supply gap in the global oil market due to a significant decline in oil production in May. Besides, OPEC oil production fell by 464,000 b/d to 28.06 million b/d in May, according to OPEC data (OPEC believes it needs 29.3 million b/d of oil demand to balance the market). Given that Saudi Arabia will cut production by a further 1 million b/d in July, the oil supply gap in July could be as high as 2.3 million b/d.

Data: The US consumer price index (CPI) rose 4% YoY in May, slightly below market expectations of 4.1%, compared with a 4.9% increase in the previous month. This is the lowest point in the 11th consecutive month of decline in the year-on-year increase of the US CPI since June 2022.

Overall: Further production cuts of Saudi Arabia have shown their determination to stabilize oil prices. However, the expectation for oil demand in 2023 is divided due to increased production in Russia and Iran and uncertainty over the global economic outlook. Therefore, investors still need to pay attention to the execution. However, with the arrival of the consumption season, the fundamentals will not change the bullish trend.

Technical Analysis

Trading at the daily timeframe, as oil prices keep fluctuating to the downside, expectations for the high continue to be lowered. In the long run, oil prices have been in a downward trend since April, without a clear end signal so far, which is necessary to be vigilant about the retreatment to around 64. However, in the short term, oil prices have been fluctuating in the 67-75 range, which can hardly be broken.

Investors should mainly go long at lows during intraday trading, rather than chasing up. A more robust trading method for intraday traders is to wait patiently for the slide to around 68.5 before taking long positions, with a focus on the peak around 71.5. Later, observing whether the price breaks at 71.5. Further up is the resistance of the 73.5-74.8 range. EIA data should be paid attention to in this transaction, as well as the impact of the Fed's decision on oil prices at that time.

Trading Recommendations

Trading Direction: Long

Entry Price: 68.500

Target Price: 71.500

Stop Loss: 66.500

Support: 66.900/64.000

Resistance: 71.500/73.500