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Fundamentals

Macro: The first-quarter GDP of China has grown 4.5% year-on-year on Tuesday (April 18), beating expectations of 4.0% and 2.9% in the fourth quarter of last year. Industrial production recorded an annual rate of 3.9% in March, slightly below expectations of 4.0% but up from 3.5% recorded in February. Retail sales came in at an annualized rate of 10.6%, well above expectations of 7.4%. All in all, China's economic recovery in the first quarter exceeded market expectations. The main driving force for the economic recovery is the rebound in consumption and the continued rapid growth of the investment. In addition, considering that the foundation affected by the epidemic in the second quarter of last year is low, the economic growth rate in the second quarter will be significantly faster than that in the first quarter. As the world's second-largest oil consumer, China's rapid recovery in the second quarter is expected to support oil demand under the generally pessimistic expectations of the European and American economies.

Inventory: U.S. crude and distillate inventories fell while gasoline inventories unexpectedly increased, data released Wednesday from the U.S. Energy Information Administration (EIA). U.S. crude inventories fell by 4.6 million barrels to 465.97 million barrels in the week ended April 14, down 1.1 million barrels expected. However, gasoline inventories increased by 1.3 million barrels to 223.54 million barrels versus an expected decrease of 1.3 million barrels.

Overall: Recently, oil prices have been corrected continuously. For one thing, the main reason is that the Iraqi federal government and the Kurdistan autonomous regional government have taken measures to resume oil exports in the north, which has weighed on oil prices. For another, the market's expectations of a recession in Europe and the United States are still lingering. Coupled with the 83.3 resistance level above WTI crude oil, bulls took profits, causing the market to fall. However, it is now necessary to recognize that the medium-term outlook for oil prices tends to be optimistic amid OPEC+ production cuts and signs of China's economic recovery becoming more apparent. The greatest uncertainty still comes from the Fed's monetary policy and the economic outlook. Therefore, international oil prices may still be subject to the uncertainty of the Fed's monetary policy in the short term. However, considering the crisis in the US banking and commercial real estate, it is expected that the space for further interest rate hikes is generally limited. Coupled with the arrival of the oil demand season, the adjustment range of oil prices is generally limited. As a result, the price center of the future market is expected to lift gradually.

Technical Analysis

From a daily perspective, WTI prices are fluctuating at high levels. Oil prices, as expected, were blocked around the previous high of 83.3, initiating a correction and successfully breaking through the integer mark of 80, which also broke through the April 3 low of around 79. The price is currently hovering below 78, and the next strong support is around 75.8, which is to cover the gap opened by this round of gap higher opening.

The MACD indicator is starting to form a death cross and the intraday tends to weaken. But overall, if WTI oil prices can effectively stabilize above $78.0, the medium-term rally will continue. What’s more, a breakthrough of $83.3 is expected to further open the upside and hit the $90 or even $100 mark.

Trading Recommendations

Trading Direction: Long

Entry Price: 77.500

Target Price: 83.300

Stop Loss: 74.500

Support: 75.600/72.500

Resistance: 80.000/83.300