Crude Oil Analysis: Stuck Between US Inflation, OPEC Policies, and Chinese Demand Potential

Crude Oil Analysis: USOIL breaches five-week lows
Saudi Aramco Base Oil breaks below its yearly lows
U.S crude oil inventories drop again this week by 2.5M barrels
Chinese economic data is awaited for an updated outlook on oil demand potential
OPEC June 1 meeting probabilities lean towards an unchanged output, according to CME Group

Source: CME Group OPEC Watch Tool

Crude Oil analysis lies at a critical juncture with a rising debate between OPEC members: some are unwilling to cut oil production below their capacities, while others seek to shore up crude prices. As previous policies have shown, OPEC members would adhere to supply cut quotas while non-members fulfill the global demand. However, members such as Iraq and UAE are eager to secure higher production levels onto 2025 with their increased production capacities.

U.S CPI metrics cooled down and are still above the Fed’s desired 2% target rate, reflecting a difficulty for a rate cut on the near horizon

In terms of crude, lower inflation levels are preferred for a better demand outlook. However, sticky inflation rates would raise questions about the ease of economic growth and demand potential. From an inventory perspective, crude oil inventories have decreased this week by a 2.5M barrel change, allowing the chart to temporarily hold on its latest 6-week low.

Quantifying the uncertainties:

Crude Oil Analysis: USOIL – Daily Time Frame – Logarithmic Scale

USOIL’s largest correction of the year proceeded to a new low of 7651 today, amplifying bearish bias on the chart. Looking at the chart from a pattern perspective, a head and shoulders pattern target could indicate further downtrends if the latest 7651 low is broken. Potential supports can be met near 7620 and 7570 on the short run, and 7530 and 7470 on a longer run. Supporting fundamentals in terms of increasing supply and weaker growth outlooks can confirm a downtrend continuation for crude oil charts. Reversing from the latest lows, upper resistance levels can be met near 81.10, 83, and 84.70 respectively.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.