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Fundamentals

During the Asian session on Wednesday (June 7th), WTI crude oil dropped slightly, and it is currently trading near $71.80/bbl. Yesterday's U.S. oil trend is still puzzling, especially closed within the SMAs, indicating that the short-term competition between Bulls/Bears is still intense without stable directional support. Today, it is expected that U.S. crude oil will probably keep oscillating, but because of yesterday's pullup from lows, the short-term structural center may be raised and narrow the oscillation range, which requires further guidance of the fundamentals. Thus, the U.S. EIA crude oil inventory data to be released in the evening is more worthy of attention.  

Macro: The latest semi-annual Global Economic Outlook released by the World Bank raised the global economic growth forecast for 2023 to 2.1% from the previous 1.7%. At the same time, the World Bank highlighted the risks and hazards of the Fed's interest rate hike and the banking crisis in Europe and the US for developing economies. Separately, the OECD released its economic outlook report, forecasting global GDP growth to slow to 2.7% in 2023 while the growth will be 2.9% in 2024. Besides, the expected U.S. federal funds rate will peak at 5.25%-5.5% in the second quarter of 2023, with two "moderate" rate cuts expected in the second half of 2024. Comparingly, the eurozone's economy is expected to grow 0.9% in 2023 and 1.5% in 2024.

News: EIA's short-term energy outlook report demonstrates that global crude oil demand growth is expected to be revised upward to 1.59 million bpd in 2023, compared with the previous estimate of 1.56 million bpd. The price of WTI crude oil is expected to be $74.60/bbl. in 2023, slightly higher than previously expected.

Generally, the current macro recession risk has not been lifted (the Fed has not yet ended monetary policy tightening). Therefore, investors still need to be wary of the downside risk that current oil prices may face, especially in the case triggered by the expected revision of the monetary policy of major central banks. However, the impact of this needs data to be constantly verified and will not be reflected instantly. On the contrary, the greater impact on crude oil results from a disturbance on the supply side, as the current production cut is settled, the implementation of production cuts is essential, especially on the Russian side. Overall, there hasn't been a plummet in demand, crude oil is difficult to appear a significant decline, but a smooth appreciation will be from July. On the one hand, the interest rate hikes will end, on the other hand, Saudi Arabia implements production cuts, as long as OPEC + production cuts are in place, the oil market gap in the summer peak is a probable event.

Technical Analysis

Daily chart: The 5-day, 10-day, and 20-day SMAs of WTI are sticking together, showing little momentum on both the demand and supply sides. The short-term center is lifted, and the oscillation is narrowed, missing further directions. But WTI is not standing above the three SMAs, suggesting the advantages of bulls.  

Today's trading plan: Don't go short today but go long after a retracement. Both bulls and bears have opportunities under the oscillating pattern, thus investors must be patient to take profits and stop losses. For aggressive traders, try to go long with small positions near the 5-day SMA ($71.5) and set the stop-loss at $70. If WTI surges to $74, take profits partially and settle the remaining positions for breakeven and take profits.

Trading Recommendations

Trading direction: Long

Entry price: 71.500

Target price: 74.500

Stop loss: 68.500

Support: 70.000/67.000

Resistance: 74.800/75.600