Despite recent worrisome macroeconomic data, Russia and Saudi Arabia’s decision to extend supply curbs beyond July helped WTI oil futures (NYMEX: CL ) start the week higher. Communications from the Saudi energy minister indicated that the kingdom would extend voluntary output cuts of 1 million barrels per day until August. Russia followed suit, announcing a voluntary supply cut of 500,000 bpd in August, sending oil futures over 1% intraday.
However, oil futures remained under selling pressure as concerns over commodity demand continued to weigh on price action. The market is worried that the current tightening cycle of monetary policy in the world’s largest economy may push the global economy into recession, and the Bank of England, European Central Bank and Federal Reserve are expected to continue raising interest rates this month.
technical side
The 4H chart shows that the bears are launching a counterattack after the bulls failed to overcome the 78.60% Fibonacci retracement level, making the $71.15/barrel (R1) resistance an immediate support for the price action. If the break below R1 is sustained, the 61.80% Fibonacci retracement level and the daily pivot will provide support for the bears to try to break the channel.
A break below the channel could trigger a sell-off to lower levels, with support levels of $69.72/b and $68.93/b being important levels for bears. However, if the bulls regain control in the near term, the market can look for short-term trading opportunities at the $71.69/b and $72.28/b price levels, as the bulls look to recapture the major resistance level at $72.72/b (green line).
Summary
Oil futures were on track for a fourth straight session of gains, and with Saudi Arabia and Russia announcing output cuts, bulls may be confident they can continue their short-term winning streak. Therefore, with short-term price action above $72.69/bbl, the market may get a short-term trading opportunity.
Sources: TradingView, Bloomberg, Trading Economics
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2023-07-04 08:32:00
