WTI Testing Breakout Strength: Analysis before Oil Inventory - 19-07-2023.

WTI Testing Breakout Strength: Analysis before Oil Inventory - 19-07-2023.

WTI Crude Oil (US Oil) Analysis


Key Points: -


·       In the early Asian session, WTI (West Texas Intermediate) crude oil consolidates its gains above $75.50.

·       Market participants anticipate that the Federal Reserve (Fed) is approaching the end of its policy tightening cycle.

·       The release of China's GDP figure raises concerns, but hopes for a stimulus plan contribute to the positive sentiment surrounding the WTI price.

Today's Scenario: -


The price of West Texas Intermediate (WTI), the US crude oil benchmark, is currently trading around the $75.52 level on Wednesday. WTI is consolidating its gains and bouncing back from Monday's low near $73.80. This is attributed to two factors: the possibility of the Federal Reserve (Fed) ending its policy tightening cycle and hopes for stimulus plans in China.

Market participants anticipate that the Fed is nearing the end of its policy tightening cycle, with 106 economists polled by Reuters between July 13 and July 18 expecting a 25 basis points rate hike to the 5.25%–5.50% range on July 26. Higher interest rates can raise borrowing costs, potentially slowing the economy and reducing oil demand.

In terms of data, the American Petroleum Institute (API) reported on Tuesday that crude oil stockpiles in the United States declined by 797,000 barrels this week, following a previous week's increase of 3.026 million barrels.

Turning to China, the Gross Domestic Product (GDP) for the country came in at an annual rate of 6.3%, which was worse than the expected 7.3% and the previous reading of 4.5%. This raised concerns about an economic slowdown in the world's second-largest oil consumer. However, China's Commerce Ministry announced measures aimed at boosting the consumption of household consumer goods and services, providing support for further upside in the WTI price.

Later in the week, the market will pay attention to the release of US Housing Starts and Unemployment Claims data. Additionally, oil traders will closely monitor crude oil inventories data from the Energy Information Administration (EIA) and stay updated on headlines related to the US-China relationship. Any renewed tension between the world's largest economies would have a significant impact on the WTI price.


Diagram of WTI Crude Oil (US Oil): -


Economic Events: -


Buy Scenario: -


WTI experienced a breakout from a consolidation range of $67.20-$74.70 on a four-hour timeframe. The current oil price is testing the strength of the breakout and is poised to resume its upward movement. The 50-period Exponential Moving Average (EMA) at $74.40 is providing support for the bullish sentiment in the oil market.


Meanwhile, the Relative Strength Index (RSI) (14) has entered the range of 40.00-60.00. This indicates that the bullish momentum has weakened, but the overall upward bias remains intact.


Looking ahead, a decisive break above the July 17 high at $76.00 would open the door for further gains, with potential resistance levels at the April 26 high of $77.86, followed by the round-level resistance at $80.00.  Till we do not advise to buy in WTI US oil.


Selling Scenario: -


On the downside, a breakdown below the July 17 low at $73.78 would lead the price towards the July 03 high at $71.83. A further decline below that level would expose the asset to the June 29 low around $69.00. Till we did not advise to sell WTI Crude oil.


Support and Resistance Level: -

 Support           Resistance  

 S1 74.39   -     R1 76.45

 S2 73.07  -      R2 77.20

 S3 72.32  -      R3 78.52


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