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Fundamentals

During Friday's (May 12th) Asian session, WTI oil prices narrowly oscillated downward. Yesterday, U.S. Treasury Secretary Yellen urged Congress to raise the $31.4 trillion federal debt limit to avoid an unprecedented default, thus triggering a global recession. Meanwhile, risk aversion pushed the USD to rebound swiftly, rising to the highest level since May 1st, with risk assets and oil prices being impacted. In addition, OPEC+ further raised China's oil demand growth forecast for 2023, but the overall forecast for global demand growth was unchanged due to the risk of possible downside demand growth in other regions. China's oil demand is expected to grow by 800,000 bpd, up from last month's estimate of 760,000 bpd growth. With the global recession expected, the height of subsequent oil prices is linked with China's demand recovery.

In April 2023, China's exports were 2.02 trillion CNH, up 16.8%, while imports were 1.41 trillion CNH, down 0.8%. Besides, in the first quarter, China's exports were 7.67 trillion CNH, up 10.6%, and the trade surplus was 2.02 trillion CNH, widening BY 56.7%. Converting the numbers in USD, that's surplus of $294.19 billion. China's foreign trade data didn't plunge but surged up.

In general, oil prices have been under bearish signals this week, with the U.S. government again postponing plans to replenish the U.S. Strategic Petroleum Reserve, the EIA Short-Term Energy Outlook report sharply lowering oil price expectations, a big increase in EIA crude oil inventories, and the U.S. debt crisis. However, considering that OPEC+ will further cut production by 1.16 million bpd from May, coupled with the overall weakening of the USD, the unchanging momentum of China's recovery, and the expected opening of the strategic oil reserve inventory replenishment in the second half of the year, the rally built by WTI crude oil relying on $64 support has not yet shown a clear reversal signal, and further gains will still be possible.

Technical Analysis

Regarding the daily chart, MACD forms a death cross at highs with an extending signal. But now WTI is closed to the oversold area with a trend of turning ahead, and the bearish momentum is weakening. Currently,  WTI tends to form a double-bottom pattern after the depreciation in April, and it started to rebound after stabilizing near the bottom at $64. Furthermore, the center was lifted to above $70, but WTI turned the direction below in the past 3 trading days to test, and there is no strong support near $70. Considering that the decline of WTI was without a complete structure, it may rebound further after stepping back on the support area between $70 to $72. This will be an opportunity for middle-term investors who are looking for appreciation, and $70 will support the middle-term rise of WTI.  

Trading Recommendations

Trading direction: Long

Entry price: 70.000

Target price: 80.000

Stop loss: 64.000

Support: 70.000/64.000

Resistance: 80.000/83.300