WTI: Balanced factors, watch for marginal changes.
Fundamentals:
During the Asian session on Friday (May 19th), WTI oil prices traded in a narrow range, currently around 72.5. Strong US economic data pushed the US dollar to a two-month high, increasing expectations of another rate hike by the Federal Reserve in June, which put pressure on oil prices. However, the market recovered from the slight decline in the overnight session as bullish sentiment improved slightly due to a significant drop in US initial jobless claims.
Supply-wise, according to data from the Joint Organizations Data Initiative (JODI) cited by the International Energy Forum (IEF) on Thursday, Saudi Arabia's crude oil exports increased from 7.455 million barrels per day in February to 7.52 million barrels per day in March. Additionally, the destructive impact of wildfires in Alberta, Canada, is reducing oil supply in the region.
In terms of news, two Federal Reserve policymakers stated on Thursday that US inflation doesn't seem to have cooled enough to warrant a pause in rate hikes. The speeches by Dallas Federal Reserve Bank President Robert Kaplan and St. Louis Federal Reserve Bank President James Bullard seemingly represented the views of a minority of hawks within the Federal Reserve, but this viewpoint has gained more support ahead of the Fed's next meeting on June 13-14. The futures market currently reflects a probability of over 30% for a rate hike in June, up from 10% a week ago.
On the data front, initial jobless claims decreased by 22,000 to a seasonally adjusted 242,000 in the week ending May 13th, marking the largest drop since November 20, 2021. Despite recent speculation about the US economy nearing a recessionary tipping point, the economy has maintained its expansion trend with strong employment, which has been surprisingly robust. This trend may continue in the near and even distant future. Currently, there are no signs of an early-stage recession as defined by the National Bureau of Economic Research (NBER), and multiple macro indicators indicate sustained economic growth, which is quite surprising.
Geopolitically, the Russian Defense Ministry released a report on the 18th stating that Russian forces launched offensives against Ukrainian forces in multiple directions, including Kupyansk, Red Leman, Donetsk, Zaporizhia, and Kherson. The Russian military also launched strikes against large warehouses holding foreign weapons in Ukraine using sea-based and air-based precision-guided weapons during the night.
Overall, resilient economic data increasing expectations of another rate hike in June by the Federal Reserve have pushed the US dollar higher, intensifying downside risks for oil prices. However, the announcement of new sanctions against Russia by the US and G7 countries may escalate geopolitical tensions and limit the decline in oil prices. Considering the balanced factors, short-term oil prices need to focus on the impact of the US debt ceiling agreement. However, based on the experience of the past 104 times, reaching an agreement is only a matter of time. Going forward, short-term developments will depend on marginal changes in various aspects and geopolitical conditions, particularly on the supply side. Currently, oil prices have failed to incentivize increased supply from US shale gas, so it is crucial to closely monitor the OPEC+ meeting in June and the information disclosed prior to the meeting.
Technical Analysis:
Daily Timeframe: After the breakdown of the downward range since mid-April, the market will continue to test the resistance at 73.60. If it can break through, this level will turn into a support level, forming a new pattern. This area is a battleground for bulls and bears. Currently, the MACD indicator has formed a bullish cross, indicating a potential upward movement.
Trade Recommendation:
Trade Direction: Long
Entry Point: 72.500
Target Point: 77.500
Stop Loss Point: 67.500
Support Levels: 70.000, 64.000
Resistance Levels: 73.600, 77.500
During the Asian session on Friday (May 19th), WTI oil prices traded in a narrow range, currently around 72.5. Strong US economic data pushed the US dollar to a two-month high, increasing expectations of another rate hike by the Federal Reserve in June, which put pressure on oil prices. However, the market recovered from the slight decline in the overnight session as bullish sentiment improved slightly due to a significant drop in US initial jobless claims.
Supply-wise, according to data from the Joint Organizations Data Initiative (JODI) cited by the International Energy Forum (IEF) on Thursday, Saudi Arabia's crude oil exports increased from 7.455 million barrels per day in February to 7.52 million barrels per day in March. Additionally, the destructive impact of wildfires in Alberta, Canada, is reducing oil supply in the region.
In terms of news, two Federal Reserve policymakers stated on Thursday that US inflation doesn't seem to have cooled enough to warrant a pause in rate hikes. The speeches by Dallas Federal Reserve Bank President Robert Kaplan and St. Louis Federal Reserve Bank President James Bullard seemingly represented the views of a minority of hawks within the Federal Reserve, but this viewpoint has gained more support ahead of the Fed's next meeting on June 13-14. The futures market currently reflects a probability of over 30% for a rate hike in June, up from 10% a week ago.
On the data front, initial jobless claims decreased by 22,000 to a seasonally adjusted 242,000 in the week ending May 13th, marking the largest drop since November 20, 2021. Despite recent speculation about the US economy nearing a recessionary tipping point, the economy has maintained its expansion trend with strong employment, which has been surprisingly robust. This trend may continue in the near and even distant future. Currently, there are no signs of an early-stage recession as defined by the National Bureau of Economic Research (NBER), and multiple macro indicators indicate sustained economic growth, which is quite surprising.
Geopolitically, the Russian Defense Ministry released a report on the 18th stating that Russian forces launched offensives against Ukrainian forces in multiple directions, including Kupyansk, Red Leman, Donetsk, Zaporizhia, and Kherson. The Russian military also launched strikes against large warehouses holding foreign weapons in Ukraine using sea-based and air-based precision-guided weapons during the night.
Overall, resilient economic data increasing expectations of another rate hike in June by the Federal Reserve have pushed the US dollar higher, intensifying downside risks for oil prices. However, the announcement of new sanctions against Russia by the US and G7 countries may escalate geopolitical tensions and limit the decline in oil prices. Considering the balanced factors, short-term oil prices need to focus on the impact of the US debt ceiling agreement. However, based on the experience of the past 104 times, reaching an agreement is only a matter of time. Going forward, short-term developments will depend on marginal changes in various aspects and geopolitical conditions, particularly on the supply side. Currently, oil prices have failed to incentivize increased supply from US shale gas, so it is crucial to closely monitor the OPEC+ meeting in June and the information disclosed prior to the meeting.
Technical Analysis:
Daily Timeframe: After the breakdown of the downward range since mid-April, the market will continue to test the resistance at 73.60. If it can break through, this level will turn into a support level, forming a new pattern. This area is a battleground for bulls and bears. Currently, the MACD indicator has formed a bullish cross, indicating a potential upward movement.
Trade Recommendation:
Trade Direction: Long
Entry Point: 72.500
Target Point: 77.500
Stop Loss Point: 67.500
Support Levels: 70.000, 64.000
Resistance Levels: 73.600, 77.500