Fundamental analysis of WTI
WTI oil prices are rising ahead of the Fed's monetary policy meeting. In addition, China's economic indicators and import quotas are affecting market sentiment.
A possible pause in rate hike may stimulate oil demand and support prices.
Yesterday the U.S. benchmark experienced a significant increase of more than 3%, supported by optimism about growing demand for fuel. This followed the Chinese central bank's decision to cut short-term interest rates. However, short-term investors have been cautious in betting on higher prices because of upcoming important data and events. These include China's industrial production, retail sales and home price index for May, which will be released tomorrow. In addition, market participants are looking forward to the release of dot forecasts from the Federal Open Market Committee (FOMC) today.
The FOMC is expected to pause. The economic outlook is unclear, and the effectiveness of multiple hikes is not helping the economy recover. Raising rates usually strengthens the U.S. dollar, making goods denominated in U.S. currency more expensive for holders of other currencies, which in turn puts pressure on oil prices. However, the pause will be able to stimulate economic growth and increase demand for oil, thereby supporting prices.
Meanwhile, China issued a third batch of import quotas for 2023, reflecting a 20% increase in total volume in the first half of this year compared to the same period last year. The quotas were mostly allocated to 33 companies, mostly independent refiners, with a total volume of 62.28 million tons. This is an increase from Beijing's 52.69 million tons issued last June and a total quota of 161.72 million tons for the first half of 2022.
At the same time, U.S. crude oil inventories increased by about 1 million barrels in the week ended June 9, contrary to analysts' average forecast of a 500,000-barrel decline. Official government stockpile data is scheduled to be released later today. In addition, OPEC+ gave Russia a slightly higher baseline oil production rate, allowing the country to increase its production from the previous agreement.
Overall, WTI oil prices are experiencing a slight upward trend as investors eagerly await the outcome of the U.S. Federal Reserve's meeting and U.S. crude stockpile data. Market sentiment is determined by China's economic data and import quotas, as well as interest rate decisions by major central banks. A possible pause in rate hikes by the U.S. central bank may stimulate oil demand and support prices.
Trading Scenarios:
Support levels: 65.80, 66.75, 68.35, 69.30
Resistance levels: 70.75, 71.85, 73.30, 74.55
Main scenario: Buy
Given the current situation, the price of WTI could continue its uptrend. If the price overcomes the resistance level of 70.75, the next target level will be 71.85 and then 73.30. In this case, the recommended level to take profit (take profit) could be set at 73.30. It is also recommended to set a stop loss at 69.05.
Alternative scenario: Sell
Short positions should be opened below the level of 69.305. In this case, the recommended level for profit taking (take profit) can be set at 66.85. To limit losses (stop loss) in this scenario, the level of 71.25 may be used.