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Fundamentals

During the Asian session on Wednesday (July 5), WTI crude oil fluctuated in a narrow range, currently trading around $71.1 / barrel. Oil prices edged higher yesterday, mainly driven by comments from Saudi Arabia and Russia on supply cuts in August. Saudi Arabia said on Monday it would extend its voluntary cuts of the 1 million b/d plan for another month, until the end of August. Russia and Algeria also expressed that they are willing to cut August production and exports by 500,000 b/d and 20,000 b/d, respectively. If the cuts are fully implemented, supplies will be reduced by a total of 5.36 million b/d from August 2022, and possibly more, professionals said. This indicates to traders a pro-oil attitude. However, the strength of the rebound in oil prices is really difficult to satisfy the market, in the context of the OPEC+ "Big Three" additional production cuts. Currently, two major factors are limiting oil prices, one is the US interest rate hike, while another is the weak data from the world's major economies recently and the gloomy global economic outlook. Therefore, the bulls and bears are being balanced, but the latter is still expected. As time has entered the peak consumption season of July, traders should better mainly focus on current demand and supply. Oil prices can hardly plummet and are about to break through the upper edge of 74, which only need a push. Traders should wait for the minutes of the Fed meeting and the non-farm payrolls, which will give clues to oil prices.

Data: US crude production was flat MoM at 12.2 million b/d in the week ended June 23. Crude imports rose 420,000 b/d MoM to 6.58 million b/d. Crude oil exports rose 800,000 b/d MoM to 5.338 million b/d. Net crude imports fell 380,000 b/d MoM to 1.242 million b/d. The number of rigs in use in US oil fell by one MoM to 545 in the week ended June 25.

Traders should pay attention to the upcoming US factory orders for May, the final US durable goods orders for May, and Eurozone services PMI data. Meanwhile, more attention should be paid to the minutes of the Fed meeting, the Fed's "No.3", and the discussions of New York Fed President Williams at the 2023 annual meeting of the Central Bank Research Association (CEBRA).

Technical Analysis

Trading at the daily timeframe, US crude oil retraced again yesterday after oscillations, testing the resistance of 71.5 line above and the support of the 69.5 line below, with the daily chart closing a white body. Oil prices came to the center of the previous High fluctuation range of 67-74, which is also the upper edge of the small oscillation range of 67.5-70.5. Currently, oil prices also stand above MA5, MA10, and MA20, with the daily chart biased to the bullish, although the strength is not strong enough. As for whether it can effectively break the position, it depends on the specific changes in oil prices. For the time being, the support levels remain unchanged at 69.5 and 67.5, while the upper resistance should focus on 72.5 and 74.

It is recommended that traders keep taking short positions during the day rather than chase up blindly! Investors need to be patient and wait for oil prices to slide to their targets. If the oil price retraces to the 70.5 line again, traders can try long lightly, with the stop loss set at 69.5 and the first target of taking profit at 72.5. After setting positions to break even, traders can look at the second target at 74 line.

Trading Recommendations

Trading Direction: Long

Entry Price: 70.500

Target Price: 74.000

Stop Loss: 69.500

Support: 69.500/67.500

Resistance: 72.500/74.000