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Fundamentals

During the Asian session on Thursday (June 29th), WTI crude oil oscillated narrowly and is currently trading near $69.3/bbl. The U.S. crude oil moved sharply higher yesterday, mainly due to a larger-than-expected drop in U.S. crude oil inventories last week. Besides, the crude oil inventories plunged by 9.6 million barrels in the week ended June 23rd. Analysts interviewed by Reuters had forecast a decline of 1.8 million barrels, compared with a decline of 2.8 million barrels in the same period last year. Last week, the inventory drop was also larger than the average decline over the five-year period 2018-2022. In addition, WTI crude oil rebounded sharply from its lows, with U.S. crude rising from about $67.2 to as high as $69.8 per barrel, approaching $70/bbl.. Nonetheless, investors stay clearly alert at $70, especially after the Fed's continued hawkish statements and a July rate hike that is basically a fixed plan. Furthermore, the market concerns that a rate hike could slow economic growth and reduce oil demand, which in many ways limited the upside of oil prices.

Inventory: The EIA data demonstrates that U.S. crude oil inventories unexpectedly fell by 9.603 million barrels last week to 454 million barrels, a 2.07% drop. Refined oil stocks decreased by 123,000 barrels, below expectations of 782,000 barrels, and gasoline stocks decreased by 603,000 barrels, compared to expectations of a 126,000 barrel decrease. Moreover, U.S. Strategic Crude Oil Reserve (SPR) stocks decreased by 1.351 million barrels to 348.6 million barrels, falling for the ninth consecutive week and reaching their lowest level since August 19th, 1983. U.S. crude oil inventories saw a sharp decline for the second consecutive week, with an unexpected 12.456 million barrel drop last week, indicating that demand remains strong, offsetting concerns about slowing economic growth and shrinking global oil demand. At the same time, U.S. shale oil production is not picking up quickly due to a lack of capital spending in the oil industry and the impact of the old and new energy transition (oil drilling in the U.S. has continued to decline since 2023). As a result, the oil market is facing a tight supply and demand situation.

Key data of today: U.S. initial jobless claims for the week ending June 24th, U.S. continuing jobless claims for the week ending June 17th, final quarterly annualized U.S. real GDP for the first quarter, the monthly rate of U.S. Pending Home Sales Index for May, and Powell's speech at 14:30 BST.

Technical Analysis

Daily chart: U.S. crude oil was under pressure again yesterday, once plunging to $67.2. After the release of the U.S. EIA data in the evening, U.S. crude oil rebounded with the highest level reaching $69.8. Also, the daily chart finally closed positively and above the 5-day SMA, but below  the 10, 20-day SMAs, while it also fails to cross through $70. Therefore, instead of turning the weak trend, WTI just stabilized the situation.  

Today's trading plan: Try to buy at lows but not chase the ascending trend, and instead wait for a sufficient decline. If WTI returns back to $68.2, try to go long with small positions and set the stop-loss at $66.7. Moreover, the primary target of taking profits will be $70.5 and the secondary target should be $72.5 after placing break-even orders.  

Trading Recommendations

Trading direction: Long

Entry price: 68.200

Target price: 70.500

Stop loss: 66.700

Support: 67.500/65.000

Resistance: 70.500/72.500