WTI crude oil futures have witnessed a period of choppy and rangebound trading over the last 10 weeks, influenced by a variety of supply and demand factors. This week was no different. September West Texas Intermediate crude oil futures settled higher on Thursday after flip-flopping during the session. The move was enough, however, to turn the market higher for the week, heading into the last day of the month and quarter. The two-sided trade was fueled by a bigger draw than expected in U.S. crude inventories but pressured by fears that rising interest rates could dent global economic growth.
Supply Factors
The recent market fluctuations can be attributed to several factors affecting the supply side of the crude oil market. One significant factor is the drawdown in U.S. crude inventories. The U.S. Energy Information Administration reported a significant reduction, surpassing expectations, which signaled tightening supplies and supported oil prices. Additionally, Saudi Arabia, as a leading member of OPEC+, announced a substantial cut in its oil output. This decision aimed to address concerns of oversupply and stabilize oil prices. However, a decline in industrial profits in China has raised concerns about fuel demand growth and its impact on oil prices.
Demand Factors
Several demand-side factors have contributed to the choppy trading in WTI crude oil futures. One such factor is the fear of rising interest rates and its potential impact on global economic…
WTI crude oil futures have witnessed a period of choppy and rangebound trading over the last 10 weeks, influenced by a variety of supply and demand factors. This week was no different. September West Texas Intermediate crude oil futures settled higher on Thursday after flip-flopping during the session. The move was enough, however, to turn the market higher for the week, heading into the last day of the month and quarter. The two-sided trade was fueled by a bigger draw than expected in U.S. crude inventories but pressured by fears that rising interest rates could dent global economic growth.
Supply Factors
The recent market fluctuations can be attributed to several factors affecting the supply side of the crude oil market. One significant factor is the drawdown in U.S. crude inventories. The U.S. Energy Information Administration reported a significant reduction, surpassing expectations, which signaled tightening supplies and supported oil prices. Additionally, Saudi Arabia, as a leading member of OPEC+, announced a substantial cut in its oil output. This decision aimed to address concerns of oversupply and stabilize oil prices. However, a decline in industrial profits in China has raised concerns about fuel demand growth and its impact on oil prices.
Demand Factors
Several demand-side factors have contributed to the choppy trading in WTI crude oil futures. One such factor is the fear of rising interest rates and its potential impact on global economic growth. Investors have been cautious due to uncertainties surrounding the Federal Reserve's approach to rate hikes. On the positive side, the United States has shown a strong labor market and GDP growth, which have supported oil demand. Positive economic indicators, such as a drop in unemployment claims and an upward revision of GDP growth for the first quarter, suggest a robust labor market and stronger-than-expected economic performance.
Rangebound Trade to Continue
In conclusion, the choppy and rangebound trading in WTI crude oil futures is driven by a combination of supply and demand factors. While uncertainties persist, including rising interest rates and geopolitical tensions, the short-term forecast remains cautiously optimistic, with potential support from supply cuts and positive economic indicators. Monitoring these factors will be crucial in assessing the future direction of WTI crude oil prices.
Weekly Technical Analysis
Weekly September WTI Crude Oil
Trend Indicator Analysis
The main trend is down according to the weekly swing chart. A trade through $64.22 will reaffirm the downtrend. A move through $81.44 will change the main trend to up.
Retracement Level Analysis
The contract range is $37.66 to $96.50. Its retracement zone at $67.08 to $60.14 is the major support. To put it into perspective how important this zone is, the market has successfully tested this area two out of the last three weeks, three out of the last five weeks and four out of the last nine weeks.
This week’s low at $69.89 represents another successful test of the 50% or upper level at $67.08. This type of price action represents a clear indication that traders are buying the dips in this value zone.
The minor range is $81.44 to $64.22. Its retracement zone at $72.83 to $74.86 is resistance. It stopped the rally the week-ending June 9 at $74.99 and the week-ending July 723 at $72.89. Buyers would have to overcome this zone for speculators to get excited about its upside potential.
Weekly Technical Forecast
The direction of the September WTI crude oil market the week-ending July 7 is likely to be determined by trader reaction to the major long-term 50% level at $67.08.
Bullish Scenario
A sustained move over $67.08 will signal the presence of aggressive counter-trend buyers. This could lead to a quick test of the minor 50% level at $72.83. This price is a potential trigger point for an acceleration to the upside with the resistance the minor 61.8% level at $74.86. This price is another potential trigger point for an acceleration to the upside.
Bearish Scenario
A sustained move under $67.08 will signal the presence of sellers. This could lead to a retest of the main bottom at $64.22. This level has to hold or prices could collapse into long-term Fibonacci level at $60.14.
Short-Term Outlook
Considering the fundamental and technical factors outlined earlier, the short-term forecast for WTI crude oil futures remains uncertain but cautiously optimistic. The market is likely to continue experiencing volatility and rangebound trading due to the conflicting dynamics of supply and demand. On the supply side, the output reduction by Saudi Arabia, along with the broader OPEC+ agreement, may help alleviate concerns of oversupply and stabilize oil prices. However, monitoring compliance among OPEC+ members and Saudi Arabia's management of spare capacity will be crucial.
Regarding demand, the impact of rising interest rates on global economic growth remains uncertain. While positive economic indicators in the United States provide some support for oil demand, any signs of a slowdown or recession could dampen demand and put downward pressure on oil prices.
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