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Fundamentals

In Monday's (July 24th) Asian session, WTI crude oil oscillated in a narrow range, and it is currently trading at $76.5/bbl. Last week, Saudi Arabia and Russia cut production and exports, raising the market's worries about tightening supply. Moreover, China's crude oil imports were strong, and all the above boosted the oil price. However, China's economic data is worse than expected, and the U.S. crude oil inventories fell less than expected, both limiting the rise in oil prices. Therefore, oil prices are currently fluctuating at highs. To start a unilateral trend, it is necessary to wait for marginal changes in the market supply and demand. In general, Saudi Arabia and Russia's production cut was implemented smoothly, with export reduction, the oil market supply got further tightened. Now, the WTI pattern is still bullish, and investors can expect a strong trend with oscillations later.  

Data: In the past 4 weeks, Russia's seaborne crude oil exports fell to a six-month low, seemingly making good on its promise to cut supply. Besides, Crude exports fell to 3.1 million bpd in the four weeks to July 16th, down 780,000 bpd from the 28-day peak to May 14th. With few European buyers left, exports to Asia also suffered, falling to their lowest level since mid-January. Furthermore, Russia's energy ministry demonstrated that Russia would cut oil exports by 2.1 million tons in the third quarter to complete a planned 500,000 b/d production cut in August.

Technical Analysis

Daily chart: WTI appreciated continuously and now stays above the 5-day, 10-day, and 20-day SMAs. The SMAs are lining upward and splitting, while the MACD also forms a golden cross and expands. For the above, WTI may reach 79.5 or 82.5. Therefore, there is sufficient space above, and it is not necessary to guess where the top is. Considering that the U.S. crude oil is oscillating under pressure, the short-term pattern is questionable, and there will be the Fed rate resolution meeting this week to enlarge the short-term oscillation. For the middle and the long term, WTI will remain growing, but it will not appreciate continuously soon. Currently, WTI will keep oscillating and a pullback support may appear to accumulate upward momentum, which will support future appreciations.

Trading recommendations: WTI crude oil retraced to the 5-day SMA in the last session, and it rebounded to the previous high as expected. For the middle and the long terms, the center of the oscillation will be lifted. If WTI retraces to the 5-day SMA (75.9), it is better for aggressive investors to go long with small positions, and set the stop-loss at 75.5. To take profits, investors should refer to 77.2 as the first target, and move the stop-loss to breakeven. The second target should be 78.5. If WTI surges to 77.5 and slows down, investors can go short with small positions, set the stop-loss at 77.8 and move the target to 76.

Trading Recommendations

Trading direction: Short

Entry price: 77.300

Target price: 75.500

Stop loss: 77.800

Support: 75.500/74.500

Resistance: 77.300/78.800