Crude oil weekly forecast: WTI range under threat as bullish momentum builds

OPEC will announce whether existing production cuts will be continued in early June
Leaks ahead of the meeting may provide clues as to what decision will be made
Russian and Saudi officials are the dealmakers to watch
WTI remains rangebound between the 200DMA and $76.80
If the range were to break next week, topside is favoured over downside

Looking for OPEC leaks ahead of key meeting

Jockeying between OPEC member states and Russia before a crucial meeting on June 1 where they will vote on whether to extend temporary production cuts looms as key driver for crude oil prices this week. Until markets have greater clarity on the outcome, WTI may struggle to break of out of the sideways range it’s been trading in since the start of May, unless we see an unexpected demand or supply shock.

Ahead of the meeting, OPEC remains upbeat on the outlook for crude demand, predicting it will lift by 2.25 million barrels per day (bpd) in 2024 with another 1.85 million bpd increase expected in 2025, in line with guidance offered a month earlier.

"Despite certain downside risks, the continued momentum observed since the start of the year could create additional upside potential for global economic growth in 2024 and beyond," OPEC said in report released last week. At face value, the assessment implies there may be grounds for OPEC and Russia to pare production cuts or stop them all together.

However, having seen prices ease over the past six weeks, in part due to a perceived lessening in geopolitical risks in the Middle East despite no ceasefire being agreed by Hamas or Israel, it’s debatable whether OPEC will go down this path. If it were to boost output, it could result in sizeable price declines, especially given concerns about the US economic outlook.

Saudi, Russian officials in focus

Since late 2022, OPEC and Russia have delivered a series of output cuts since to bring the crude market back into better balance, resulting in declining inventories and higher prices. The latest cut of 2.2 million bpd is due to expire at the end of June. Within that figure, the vast bulk is accounted for by Saudi Arabia and Russia at 1.5 million bpd, making representatives from those nations the key ones to watch for traders.

Source: ANZ

Geopolitics, China sentiment may be influential

Outside of jockeying ahead of the June 1 meeting in Vienna, geopolitical tensions in the Middle East have yet to be resolved, ensuring headline risk will likely remain an ever-present threat Elsewhere, US inventory data from API and EIA released on Tuesday and Wednesday respectively carry the potential to generate short-term volatility in crude prices. Sentiment in broader commodity markets may also be influential based on the price action seen on Friday.

WTI price outlook: bullish momentum hints at possible topside break

You can see the narrow range WTI has been trading in since the end of April on the daily chart, sandwiched between the 200-day simple moving average on the topside and support from $76.80 on the downside. Unsurprisingly, the price action has seen volumes ebb in recent weeks as traders await a definitive breakout one way or another.

With RSI trending higher and MACD crossing over from below to end the week, momentum indicators are turning bullish. And when you look at the strong bounces from $76.80 when the crude tested the bottom of the range earlier this month, you get the sense that if the price were to break out of the range, it would more likely be to the upside than downside.

Monday could set the tone given the bullish price action seen across the commodities complex on Friday as China announced a rescue package for its troubled property sector. If the momentum can be maintained, there’s every chance WTI may break downtrend resistance dating back to the highs set in April, putting it on track for a retest of the 200DMA.

A break and close above the 200DMA and horizontal resistance at $80.30 may encourage bulls to seek out the 50DMA located at $81.79. From there, $84.50 and $87.65 are the next topside targets. On the downside, support layered between $76.80 to $76 may be difficult for bears to crack near-term.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

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.