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Fundamentals

Macro: The International Monetary Fund (IMF) revised its 2023 global economic growth forecast slightly downward from 2.9% to 2.8%. Besides, US CPI was lower than market expectations, and market concerns about US inflation continue to ease, with May likely to be the last Fed rate hike of the round by 25 basis points, suggesting lower USD's restriction on the oil price.

Supply: Russia cut oil production by 700,000 bpd in March, higher than originally planned. Meanwhile, crude oil exports from Russian ports declined to 2.3 million bpd in the week of April 10th, the largest single-week drop since storms hit two export ports in mid-December last year, with further reductions still possible later.

Demand: China's crude oil imports in March were up 22.5% YoY, and China's 1Q GDP released today exceeded expectations by a growth of 4.5%. At the same time, amid external concerns about the US economy entering recession expectations, New York also delivered better data yesterday, crashing the recession theory with the New York State Manufacturing Index soaring to 10.8 in April. It is the first time in five months that this data turning positive, and well above March's -24.6 as well as the market's expectation of -18. Moreover, the new orders index rose 4.7 to 25.1 in April, while the shipments index rose 3.7 to 23.9, reversing the decline of recent months.

Inventory: US crude oil production increased by 0.1 million barrels to 12.3 million bpd in the week ended April 07th. Commercial crude stocks were increased by 597,000 barrels with -583,000 barrels expected and the previous number was -373,000 barrels. Cushing crude stocks and Strategic Petroleum Reserve (SPR) stocks were -409,000 barrels and -1.6 million barrels with previous numbers of -970,000 barrels and -400,000 barrels respectively. Furthermore, the Gasoline stocks were -330,000 barrels, while the expected number was -1.6 million barrels, and the previous number was -411.9 million barrels.

In general: US data indicates a decline in inflation. Moreover, the US rate hike is arriving at the end, Russian exports have signs of weakening, and China's crude oil imports in March raise 22.5% YoY, all demonstrating that the positive data in both supply and demand sides support crude oil. In addition, if oil prices continue to plunge, OPEC+ will keep production cut, which can be seen from the last time when OPEC+ decided to maintain the price. Meanwhile, the U.S. SPR has reached a historical low and is still falling now, the recovery of stock could start at any time, which should push up the oil price then. At present, the retracement of oil prices is sufficient, try to wait for a rise while the upward trend has less resistance.

Technical Analysis

Regarding the daily chart, WTI keeps oscillating at highs and it is restricted at the previous high (83.3) as expected, opening a round of retracement. Additionally, the initial support below should be 80 with further support near the low of April 3rd (79). If WTI breaks through this position, further descending space will be opened. Then, the strong support will be near 75.8, recovering the gap of this time's opening at highs.

MACD maintains a golden cross now. WTI fails to enter the overbought zone despite signs of turning around, and the upper space is clear before it plummets below the support. Besides, the initial support is near the previous high (83.2), and further resistance will reach 86 if this position is broken rapidly. Then, the upper space will be open as well when this position is broken, and the strong resistance should be at 90 or 93 (the high of the past 6 months).

Trading Recommendations

Trading direction: Long

Entry price: 80.000

Target price: 83.500

Stop loss: 76.500

Support: 80.000/76.500

Resistance: 83.500/86.000