OIL Further Price accumulation on the way?
Fundamental Analysis
Here are the important updates about oil and the market:
The uncertainty surrounding the US debt-ceiling talks is affecting the price of oil. If the US defaults on its debt, it could lead to a global recession.
The US Dollar is gaining value because investors are seeking safety and there are expectations that the Federal Reserve will continue to raise interest rates.
Recent macroeconomic data from the US supports the strength of the US Dollar. The Gross Domestic Product (GDP) for the first quarter was revised up to 1.3% from an initial estimate of 1.1%. The GDP price index was also revised up to 4.2% from 4.0%. Additionally, the Core Personal Consumption Expenditures for the first quarter were revised up to 5.0% from 4.9%.
The US Dollar is further supported by positive labor market data. The number of Initial Jobless Claims for May 19 was lower than expected, indicating a strong job market.
The Energy Information Administration released inventory data on Wednesday, showing a much larger-than-expected decrease of 12.5 million barrels. This suggests that there is robust demand for oil. Analysts had predicted a rise of 775,000 barrels.
The oil price received support from comments made by Saudi Oil Minister, Prince Abdulaziz bin Salman. He warned speculators to be cautious and mentioned that they might face consequences similar to what happened in April. His comments are seen as a warning to those who are betting against the price of oil.
Abdulaziz defended the decision made by OPEC to cut production by 2 million barrels per day at their October 2022 meeting. Since the oil price is currently at similar levels to October, there is a possibility that OPEC may announce another production cut in June.
The Memorial Day weekend in the US, starting on May 27, marks the beginning of the summer driving season. This will increase the demand for oil, which will likely support oil prices.
Technical Analysis
We believe that the price of oil went down earlier this morning (Thursday) because traders were worried about the debt ceiling and wanted to secure their profits from the recent increase in prices. Oil is mainly priced in US Dollars, and since the US Dollar is getting stronger, it is putting pressure on the price of Oil price too.
Right now, price is in a somewhat messy “bullish range” ($70 to $75) potentially making a “five-wave” corrective pattern - so would expect to reverse from $71 / $70 price lower level, to go back up to the $77 price level and potentially reverse down one more time before seeing any true bullish move. Right now, Oil price is not clean, so I would like to wait the end of this price accumulation before looking at any trades.
Here are the important updates about oil and the market:
The uncertainty surrounding the US debt-ceiling talks is affecting the price of oil. If the US defaults on its debt, it could lead to a global recession.
The US Dollar is gaining value because investors are seeking safety and there are expectations that the Federal Reserve will continue to raise interest rates.
Recent macroeconomic data from the US supports the strength of the US Dollar. The Gross Domestic Product (GDP) for the first quarter was revised up to 1.3% from an initial estimate of 1.1%. The GDP price index was also revised up to 4.2% from 4.0%. Additionally, the Core Personal Consumption Expenditures for the first quarter were revised up to 5.0% from 4.9%.
The US Dollar is further supported by positive labor market data. The number of Initial Jobless Claims for May 19 was lower than expected, indicating a strong job market.
The Energy Information Administration released inventory data on Wednesday, showing a much larger-than-expected decrease of 12.5 million barrels. This suggests that there is robust demand for oil. Analysts had predicted a rise of 775,000 barrels.
The oil price received support from comments made by Saudi Oil Minister, Prince Abdulaziz bin Salman. He warned speculators to be cautious and mentioned that they might face consequences similar to what happened in April. His comments are seen as a warning to those who are betting against the price of oil.
Abdulaziz defended the decision made by OPEC to cut production by 2 million barrels per day at their October 2022 meeting. Since the oil price is currently at similar levels to October, there is a possibility that OPEC may announce another production cut in June.
The Memorial Day weekend in the US, starting on May 27, marks the beginning of the summer driving season. This will increase the demand for oil, which will likely support oil prices.
Technical Analysis
We believe that the price of oil went down earlier this morning (Thursday) because traders were worried about the debt ceiling and wanted to secure their profits from the recent increase in prices. Oil is mainly priced in US Dollars, and since the US Dollar is getting stronger, it is putting pressure on the price of Oil price too.
Right now, price is in a somewhat messy “bullish range” ($70 to $75) potentially making a “five-wave” corrective pattern - so would expect to reverse from $71 / $70 price lower level, to go back up to the $77 price level and potentially reverse down one more time before seeing any true bullish move. Right now, Oil price is not clean, so I would like to wait the end of this price accumulation before looking at any trades.
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