The WTI Crude Oil Futures (NYMEX: CL) are surging this week, trading 92 basis points higher, underpinned by a confluence of factors shaping market sentiment. The cooling down of U.S. inflation and an unexpected inventory drawdown reported by the Energy Information Administration (EIA) have propelled prices upward.
With April’s inflation rate meeting expectations at 3.4% year-on-year and core inflation slowing to its lowest pace since April 2021, markets are pricing in a 32% probability of a rate cut in July. September emerges as the frontrunner for a potential rate adjustment, with the prospect of accommodative monetary policy igniting optimism for economic expansion, boosting the oil futures.
Moreover, the EIA’s report of a significant -2.508M barrel drawdown in inventory indicates robust demand for oil, further fuelling the bullish momentum in oil futures. These combined factors underscore the intricate interplay between macroeconomic indicators and market dynamics driving oil prices.
Technical
The WTI Crude Oil Futures are entrenched in a downtrend, trading below the 100-day moving average, with a descending channel pattern confirming the bearish trajectory.
Resistance at the $83.30 per barrel (BLL) level halted upward movement, aligning with the channel’s upper boundary. Selling pressures intensified, driving the oil futures lower. However, at the $76.89 BLL support level, a glimmer of hope emerged amid oversold RSI conditions, sparking a brief rebound.
Yet, this rally was short-lived as it encountered resistance at the 50% Fibonacci Retracement level. Currently, the oil futures remain subdued, trading below the 50% level, having retested the support and rebounded once more. The 50% level holds significance, potentially serving as a point of interest to the upside if robust buying volume supports the rebound. Conversely, the $76.89 BLL support level may face another test if selling pressures mount.
Summary
Oil Futures are rising on easing inflation and inventory drawdown, fueled by prospects of accommodative monetary policy. Amidst a downtrend, trading below the 100-day moving average, key technical levels at $83.30 and $76.89 BLL indicate potential shifts in momentum, reflecting the delicate balance between market dynamics and economic indicators.
Sources: Energy Information Administration, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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