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Fundamentals

During the Asian session on Monday (August 7), WTI crude oil fluctuated to the downside and is currently trading around 82.3 dollar per barrel.

Last week, Saudi Arabia and Russia pledged to continue cutting production next month. At the same time, the US data was not as weak as the market predicted, still maintaining strong resilience. This supported international oil prices to keep fluctuating higher. However, as the bulls showed signs of overbought at the stage high, the market's fear of heights and risk aversion gradually increased, which largely limited the increase in oil prices. The last largest pullback, which has reached the 78.5 line, was too narrow away from this new positive. Since the pullback is not sufficient in time and space, it has not been able to dispel the fear of heights of the bulls. Later, oil prices may face a weak upward increase in the resistance zone, creating a wave of correction to give the bulls time to digest.

News: The OPEC Joint Ministerial Oversight Committee (JMMC) was held last Friday, which has discussed the crude oil market circumstance, in the context of Saudi Arabia's production cuts that began in early July. Given that oil prices rose due to voluntary production cuts, the ministerial claimed that it "will continue to assess market conditions closely." Therefore, there is no need to expand to OPEC+. Saudi Arabia will continue to cut production voluntarily by 1 million b/d in September, with the possibility of further extensions thereafter. Russia will also cut production by 0.3 million b/d in September. At present, the production cuts, led by the OPEC, account for about 3.6% of total global oil demand, except for voluntary production cuts.

Data for investors to focus on today is the API statistics.

Technical Analysis

Trading at the daily timeframe, as the recession trade following the downgrade of the US credit rating last week is fading, oil prices started to strengthen last Friday. Looking at the WTI daily timeframe, the expected fallback has changed due to the fundamental news. Though technically WTI will still be resisted around 83.5, sentiment driven by the fundamentals could keep it at high levels. We don't know where is the peak and also cannot go short without further bearish signals. Such a state is unfavorable for our trading. Aggressive investors can short WTI at 83.5, but remember, with a small position and a small stop-loss.

Investors should still pay attention to the battle for the 82.3 line during the day. If oil prices move higher again, traders should focus on strong upper resistance in the 83-83.5 area. The lower support should first focus on the MA10 at 81.5, then watching the MA10 at 80.7. Once the MA5 and MA10 are lost, oil prices will most likely return to the MA20 at 78.3.

Trading Recommendations

Trading Direction: Short

Entry Price: 82.500

Target Price: 80.300

Stop Loss: 82.900

Support: 80.300/78.500

Resistance: 82.800/83.500