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US Crude Oil Weekly Forecast: Upbeat Market Looks To China GDP

US Crude Oil Weekly Forecast: Upbeat Market Looks To China GDP

David Cottle, Analyst


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US Crude Oil Price Forecast: Bullish

  • The prospects for both energy demand and supply seem to be pointing to higher prices
  • Lower US inflation has the market daring to dream of friendlier monetary policy
  • Chinese growth figures could add to the cheer
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Crude oil prices have risen for a third straight week bolstered by a wide variety of support and this trend looks likely to continue.

Signs of weaker inflation in the United States have markets pricing in the end of interest-rate hikes there much sooner than they had before. The prospect of a Federal Reserve no longer actively trying to reduce demand in its home economy has certainly been part of renewed vigor in the energy market. Admittedly rates likely have further to rise in other major economies, notably those of the Eurozone and the United Kingdom, but the success of the US in fighting inflation has at least reassured investors that the war is winnable.

Supply disruptions in major producers Libya and Nigeria have also given prices a boost, against a backdrop of planned longer output cuts from the world’s largest exporters Saudi Arabia and Russia.

The demand picture also looks rosier than it did. The Organization of Petroleum Exporting Countries recently forecast a 2.2% increase in crude oil demand for next year, a forecast which, if realized could see oil prices back above $100/barrel according to analysts at National Australia Bank.

Oil prices had been struggling since May with fears of a hugely oversupplied market meeting rather shaky global energy needs. While that picture hasn’t been entirely altered by this week’s economic data, the market certainly looks a little more upbeat both in terms of supply and likely demand. Both OPEC and the International Energy Authority think demand will pick up in the second half of this year, especially in China.

The coming week will bring plentiful chances for investors to measure these expectations against economic reality, with lots of official inflation data on the slate, along with Chinese growth figures for this year’s second quarter. The markets are looking for a respectable annualized gain of 7.3%, which should further support the energy market if achieved.

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US Crude Oil Technical Analysis

Chart Compiled Using TradingVIew

The price of US benchmark West Texas Intermediate crude has leapt back into the broad trading band they’ve been reluctant to leave since November last year. The latest rises have seen them back up to levels not seen since late April and bulls will have their sights set on resistance from back then, with $78.98 in focus as April 28’s high.

The market would have to consolidate around there, in all likelihood before an attempt at the broad range top of $83.89 could be attempted. Given the speedy gains already made that could be too much to expect in the near-term even if the fundamentals point to more gains.

Reverses could find support at July 6’s intraday peak of $73.91 ahead of the old downward channel top at $72.70.

WTI has also broken out of a symmetrical triangle pattern to the upside. Given that traders often await the ending of this ‘neutral’ chart formation for a major technical direction cue, it’s perhaps unsurprising that the upside break has seen plenty of follow-through buying.

This could fade somewhat in the week ahead, but this market looks set to remain well-supported.

--By David Cottle for DailyDFX

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