Crude Short oil make another bearish attemptThe price of crude oil is currently under bearish pressure below $70.00. No lower low printed on the daily chart yet in the previous bearish attempt. However, observing the candle close, there are more bearish candlesticks with strong momentum. It can be said that the sentiment is bearish and the bear traders have the upper hand. For now, traders should watch price developments by observing new higher high or lower low.
Today’s critical level to watch:
Support: $70.00, $65.00
Resistance: $77.13, $80.00, $85.00
WTI crude futures extended losses to nearly 5% to below $67 per barrel on Monday, the lowest in over five weeks, as concerns about weakening demand in top consumer China and rising Russian crude supply outweighed Saudi Arabia's plans to slash output. Russian oil exports to China and India rose to record levels in May even after the implementation of the European Union’s embargo and the Group of Seven’s price cap mechanism that started in early December. On the other hand, Saudi Arabia, the world's largest oil exporter, announced earlier this month its intention to reduce output by 1 million barrels per day to 9 million bpd in July, the lowest level in years amid an effort to bolster crude prices. Meanwhile, investors are cautious ahead of a busy week ahead with the US inflation rate and interest rate decisions from the Federal Reserve, the ECB and the BoJ.
WTI crude oil is trending lower inside a newly-formed falling channel on its hourly time frame. Price just broke through the mid-channel area of interest and is setting its sights on support around $68 per barrel.
Commodities like crude oil are currently being weighed down by dollar strength, as traders appear to be pricing in another Fed interest rate hike during the FOMC statement this week.
Prior to that, the US CPI is up for release, and a strong headline figure might be enough to ramp up hopes for a 0.25% increase in borrowing costs. Recall that the May NFP reading also beat estimates again, so the US central bank has some room to tighten.
Meanwhile, crude oil could also take cues from the API and EIA inventory numbers, as another draw in stockpiles might mean upside for the commodity. A build, on the other hand, might suggest that purchases are slow or that supply remains elevated.
Still, keep in mind that the OPEC+ announced voluntary output cuts, which could translate to lower global supply levels.
However, technical indicators are suggesting that a bounce is due soon. For one, the 100 SMA is above the 200 SMA to show that bullish pressure is present and that support is more likely to hold than to break. Then again, crude oil is trading below both indicators, so these could hold as dynamic resistance levels on rallies.
Stochastic has been reflecting oversold conditions for quite some time, so turning higher would mean a return in bullish pressure. The oscillator has plenty of room to climb before reaching the overbought zone, so buyers could stay in control for a while.
RSI has also been lingering around the oversold area for a while, so a return in upside momentum might be due soon.
US Inflation Rate Seen Falling to 4.1%
The annual inflation rate in the US likely fell to 4.1% in May 2023, the lowest since March 2021, from 4.9% in April and 5% in March, mainly due to lower energy prices. On a monthly basis, the CPI is projected to increase by 0.2%, easing from a 0.4% rise in April. Meanwhile, core inflation is expected to decrease to 5.3% from 5.5%, with the monthly rate projected to remain at 0.4%, the same as in April. The upcoming data precedes the Federal Reserve's interest rate decision on Wednesday and is expected to strengthen the case for a pause in its tightening cycle.
The annual inflation rate in the US likely fell to 4.1% in May 2023, the lowest since March 2021, from 4.9% in April and 5% in March, mainly due to lower energy prices. On a monthly basis, the CPI is projected to increase by 0.2%, easing from a 0.4% rise in April. Meanwhile, core inflation is expected to decrease to 5.3% from 5.5%, with the monthly rate projected to remain at 0.4%, the same as in April. The upcoming data precedes the Federal Reserve's interest rate decision on Wednesday
and is expected to strengthen the case for a pause in its tightening cycle.
European Natural Gas Down after Last Week's Rally
Natural gas futures in Europe fell more than 6% below €30 per megawatt-hour, on some profit-taking after last week's 35% rally as investors weigh lower supplies against ample gas storage levels and weaker demand. Gas shipments from the US are becoming scarcer as the supply is funneled to Asia, where prices are more competitive in the summer months due to stronger demand for cooling. Meanwhile, Norway's Equinor has postponed the restart of its Hammerfest LNG plant to June 14 due to technical difficulties. Additionally, the Turkstream gas pipeline, which transports gas from Russia through the Black Sea to Turkey, has been closed for maintenance work. Currently, Europe's gas storage is 70.4% full, and the European Union aims to achieve a storage inventory target of 90% by November 1.
Brent crude futures fell below $74 per barrel on Monday, as concerns about weakening demand in top consumer China and rising Russian crude supply outweighed Saudi Arabia's plans to slash output. Russian oil exports to China and India rose to record levels in May even after the implementation of the European Union’s embargo and the Group of Seven’s price cap mechanism that started in early December. On the other hand, Saudi Arabia, the world's largest oil exporter, announced earlier this month its intention to reduce output by 1 million barrels per day to 9 million bpd in July, the lowest level in years amid an effort to bolster crude prices. Meanwhile, investors are cautious ahead of a busy week ahead with the US inflation rate and interest rate decisions from the Federal Reserve, the ECB and the BoJ.
