WTI OIL PRICE, CHARTS AND ANALYSIS:
WTI TECHNICAL OUTLOOK: MIXED
- WTI Late Week Rally in Vain as Oil Prices Finish the Week Down.
- Technicals Hint at the Possibility of Further Upside and Deeper Retracement in the Short-Term. Morningstar Candlestick Pattern on the Daily Timeframe.
- Chinese Inflation Data and Overall Market Sentiment Likely to be Key for Oil Prices in the Week Ahead.
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WTI WEEK IN REVIEW AND WORLD BANK OUTLOOK
Crude Oil had a tough week and finished in the red for a third consecutive week, printing a new multi month low in the process. The strong rally to close out the week may have staved off what would’ve been one of the worst weeks for oil in recent memory.
Oil prices are struggling to shake the doom and gloom in markets at present which are driving overall sentiment and negatively impacting oil prices. This dent in sentiment has come about thanks to a host of factors with renewed US Banking fears, concern over manufacturing and industrial data out of China and falling US inventories while a deal to unlock Kurdish Oil exports failed.
US Inventories data from the EIA declined by around 0.3% for the week ending April 28, marking a third consecutive week of declines. Crude in the Strategic Petroleum Reserve (SPR) declined 2 million to 364.9 million barrels, its lowest since October 1983. Levels dropped for the third week in a row as part of a congressionally mandated sale of 26 million barrels. Despite Oil prices recently being in an area that market participants hoped would spur the US government into action to replenish the SPR, the Biden administration confirmed that refilling the SPR would take time. In a further nod to a slowing economy, demand for motor fuel ahead of the peak summer driving season fell significantly, down 9.4% to 8.6 million barrels per day.
Heading into the new week, a lot rests on sentiment and in particular how the US addresses ongoing concerns around Regional Banks. The weekend provides US authorities with an opportunity to iron out any further response and actions should they wish to calm market participants moving forward.
Among the other risks to consider in the week ahead is the ongoing Kurdish export issues, with Iraq hoping to restore exports as soon as possible. This would see the resumption of approximately 450k bpd of oil exports enter the market following a month of no supply. The resulting impact could weigh further on oil prices and facilitate further declines.
Overall market sentiment is likely to be the biggest driver for oil prices in the week ahead, barring any new surprises. Continuing fears around the banking sector in the US and a global recession could see oil prices retreat toward the recent multi-month low print, while a recovery in sentiment is likely to see the late week rally continue.
Chinese inflation data may be worth keeping an eye on as well this week following a fall previously. An uptick in Chinese inflation could be seen as a positive for Oil demand while a further drop in inflation could indicate a fall in consumer spending and may spur on Chinese authorities to institute further monetary easing in a bid to stimulate growth.
Also of interest was the announcement by OPEC+ who have confirmed that they will hold the June meeting in person in Vienna following the recent slump in oil prices. Are we in for further tightening of production targets?
ECONOMIC CALENDAR FOR THE WEEK AHEAD
The week ahead on the calendar remains busy with a couple of ‘high’ rated data releases, and ‘medium’ rated data releases expected which could have a bearing on Oil prices.
Here are some of the key high ‘rated’ risk events for the week ahead on the economic calendar:
- On Wednesday, May 10, we have US CPI data due at 12h30 GMT.
- On Thursday, May 11, we have Chinese Inflation due at 01h30 GMT.
- On Thursday, May 11, we have the US PPI data due at 12h30 GMT.
The weekly chart for WTI shows a large downside wick which is greater than the body of the candle, a sign of the buying pressure which came to the fore on Thursday and Friday. The 200-day MA served as some sort of support this week while the 50 and 100-day MA continue to threaten a death cross. On the weekly chart we seem to be in a very broad trading range since November 2022, with the low of the range around the $64.50 and the high resting around the $83 a barrel mark. Price action and overall structure remains bullish on the weekly with only a weekly candle close below the March 13 low around the $66 a barrel a handle.
The daily timeframe has seen a bullish close to the week with a morningstar candlestick pattern out of oversold territory on the RSI. This coupled with the size of the wick on the weekly candle gives me optimism that we could see the bullish recovery extend into the new week. Key resistance rests levels ahead with a daily candle close above the $76.70 a barrel mark needed before the structure on the daily timeframe turns bullish. Any push higher from current price remains susceptible to downside continuation below the $76.70 mark.
Given the confluence supporting a deeper recovery heading into the new week I would like to reiterate that any moves could still be overshadowed by overall sentiment. Technical setups have been blown out of the water of late as market sentiment continues to sway back and forth.
Key Levels to Keep an Eye Out For
$75.60 (50-day MA)
$76.70 (100-day MA)
Key support levels: