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Fundamentals

During Friday's (Aug. 4) Asian session, WTI crude oil oscillated downward, and it is currently trading near $81.3/bbl. Yesterday, oil prices surged in the evening as expected due to the tight supply from Saudi Arabia and Russia. Saudi Arabia said it would extend its voluntary production cuts of 1 million bpd for a third month to the end of September, adding that it may extend the voluntary cuts. Meanwhile, Russia also confirmed that it would further cut 300,000 bpd of exports in September. Due to the production cuts, oil prices' positive trend is fundamentally unchanged. Yesterday, we emphasized that the oil price retracement is just for a better rise, and it successfully retraced to 78.5, which is the perfect level for long positions. At present, oil prices reach 81.5 again, a sharp rebound for 3 dollars, and oscillate near the 5-day SMA. Tonight, there will be Nonfarm Payrolls data, and oil prices will continue to be strong after oscillations. Thus, investors should not chase the upward trend today but go long after the retracement.

Data: As of the week of July 28th, 2023, U.S. crude oil inventories totaled 786.53 million barrels (including SPR), down 17.05 million barrels from the previous week. In addition, U.S. commercial crude oil inventories were 439.771 million barrels, down 17.05 million barrels from the previous week, the largest drop since 1982. U.S. ISM non-manufacturing index lowered to 52.7 in July, and the June PPI for the Eurozone fell 3.4% YoY in June, the biggest plummet since June 2020.

Today's focus: U.S. Nonfarm Payrolls report.

Daily chart: Yesterday, the U.S. crude oil retraced under pressure at 80.5 as expected and fell to 78.5. In the evening, there was unexpected fundamental news, that Saudi Arabia confirmed the extension of the production cuts, which boosted the U.S. crude oil to 81. However, it fell back to 80 rapidly, caused by the mismatch between the unexpected favorable news and the current technical trend of U.S. crude oil expectations. However, as the market accepted the news, the U.S. oil rebounded, testing the resistance at 82 and closing the daily chart positively. Such a gain almost recovered Wednesday's giant bearish candle, proving that the technical force seems weak compared to the sentiments brought by fundamentals. Now, investors can only balance the positions by considering the profits and losses.

Today's trading plan: Keep an eye on the oscillations near 82.2. If WTI appreciates, investors need to focus on the strong resistance from 83 to 83.5 above. For the situation below, try to focus on the oscillations near the 5-day SMA (81.2), and the support should be near the 10-day SMA (80.3).

Trading Recommendations

Trading direction: Short

Entry price: 83.200

Target price: 81.200

Stop loss: 83.600

Support: 80.300/78.500

Resistance: 82.300/83.500