CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Crude oil forecast: WTI turns positive, snapping 3-day fall

Article By: ,  Market Analyst
July 10, 2024 4:45 PM

Crude oil prices turned high on the session, with Brent finding good support from $84.00 and WTI around $80.50. If the gains can be sustained into the close, oil prices will snap a three-day sell-off. The recovery seems to have been driven by expectations that oil market will tighten later in the year, after another bigger-than-expected drawdown of US oil stocks was reported by the US Department of Energy earlier. Prior to the recovery in the second half of the day, oil prices were looking quite bleak, threatening to fall for a fourth consecutive day. Those declines were partly driven by the milder-than-expected impact of a US hurricane and after recent global economic data dampened oil investors’ expectations for demand growth. However, some forecasters, including the Energy Information Administration (EIA), still anticipate higher oil prices due to slower output growth. We share this view and believe oil prices will rise further in the second half of the year as the market tightens. Therefore, our crude oil forecast remains bullish.

Crude oil forecast: Video technical analysis

 

Crude oil stocks fall more than expected

 

Earlier today, we saw the latest crude oil stockpiles data from the US Department of Energy's Energy Information Administration (EIA) come out better than expected:

 

  • Crude stocks -3.443MM, Exp. +1.0MM
  • Gasoline -2.006MM
  • Distillates +4.884MM
  • Cushing -702K
  • SPR +477K
  • Production 13.3MMb/d +100k

 

Crude oil had already bounced off its lows before the latest US oil inventories data came out, and so prices didn't show any material reaction in immediate response. However, a couple of minutes afterwards when investors digested the data, prices broke above $81.50, which then gave rise to further technical buying above that level.

 

The muted initial response was partly because the American Petroleum Institute (API) had already estimated yesterday that there would be a bigger-than-expected drawdown in oil stocks.

 

Crude oil forecast: Bullish trend remains intact

 

In any event, the bullish trend remains intact and if we see a positive close today around the $80.00-$81.50 support area, then this would bode well for the trend followers as we head into the business end of the week.

 

WTI has been testing a key support area in the last couple of days following its recent drop.

 

Source: TradingView.com

 

Prices have been testing support around the upper end of the $80.00 - $81.50 area, which had been resistance in the past.

 

I am expecting prices to rebound around this key support area given the bullish price structure of crude oil over the past several days. If so, another test of the bearish trend line dating back to September 2023 should not come as a surprise, around the $84.00 area.

 

The crucial support level is now around $80.00, which is the most recent low before the latest rally. If WTI breaks below this level, it would invalidate its still-bullish technical outlook. However, my base case scenario suggests that we could see a recovery from the current levels.

 

So, as things stand, I maintain a bullish crude oil forecast for the reasons stated above.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

 

How to trade with City Index

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

  1. 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

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024