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Crude Oil Forecast: API Data Eyed as Energy Traders Fly at Night Amid EIA Debacle

Crude Oil Forecast: API Data Eyed as Energy Traders Fly at Night Amid EIA Debacle

Thomas Westwater, Analyst

Crude Oil, WTI, Economy, PBOC, API Inventory Data - Talking Points

  • Crude oil rises as economic signals support further growth
  • US API inventory data critical to prices amid EIA data blackout
  • 23.6% Fibonacci and the 20-day SMA offer potential resistance
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Crude oil prices were trading higher through early Asia-Pacific trading on Tuesday, extending gains from the prior day and putting Brent and WTI prices on track to snap a two-week losing streak. Energy traders hit the buy button despite a pullback in risk sentiment that sent US stocks lower on the opening day of US trading.

However, encouraging economic data out of the United States and pro-growth comments from Chinese policymakers helped support economically sensitive oil prices. US durables data beat analysts’ expectations overnight. Durable goods orders excluding transportation and military orders—a proxy for business spending—rose 0.5% month-over-month in May, beating the 0.3% Bloomberg consensus forecast. The surprise cooled fears about an incoming recession by showing underlying health in US manufacturing activity.

The Asia-Pacific region, meanwhile, is set to receive additional accommodative support from China, the economic engine of the eastern hemisphere. The People’s Bank of China Governor Yi Gang vowed to provide additional monetary support to the economy. The PBOC has been modest in its approach to loosening policy thus far, but the commentary may be intended to prepare the markets for additional easing actions in the months ahead.

China’s relatively low inflation rate compared to its major peer nations allows the PBOC some breathing room to cut rates when most countries are doing the opposite. The Chinese central bank cut its 5-year Loan Prime Rate (LPR) by 15-basis-points last month following a 20-bps cut to its minimum mortgage rate for first-time home purchasers. Further cuts are likely to stimulate economic growth, which would bolster the oil demand, although Mr. Gang’s commentary alone seems to be enough to provide some upside for prices.

The American Petroleum Institute (API) is set to release US inventory data for the week ending June 24 tonight. Crude stocks increased 5.61 million barrels for the week ending June 17, a healthy gain and the highest since February. If tonight’s data shows a similar inventory build, it would likely pressure oil prices. The Energy Information Administration’s weekly report remains delayed indefinitely as the agency deals with technical issues relating to its servers. This void of information leaves energy traders with a considerable gap in data, leaving the API data all that more valuable for the time being. That said, tonight’s API release may have a larger-than-normal impact on crude prices.

Crude Oil Technical Forecast

The 23.6% Fibonacci retracement level and the falling 20-day Simple Moving Average (SMA) may serve as confluent resistance if prices continue to rise after bouncing off the 38.2% fib level. A break higher would have bulls aim at the December 2021 trendline. Alternatively, the 38.2% fib may provide some resistance if the rally reverses.

Crude Oil Daily Chart

crude oil chart

Chart created with TradingView

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--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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