WTI crude oil prices rise as investors await Fed meeting and data, fueled by potential rate hike pause, stimulating demand.
U.S. West Texas Intermediate (WTI) crude oil prices are showing a modest increase during Asian morning trade on Wednesday. Investors are eagerly awaiting the outcome of the U.S. Federal Reserve’s June meeting and the release of government data on U.S. crude stockpiles. Additionally, fresh economic data from China is providing support to prices.
Yesterday, the U.S. benchmark experienced a significant surge of over 3% fueled by optimism surrounding rising fuel demand. This followed China’s central bank’s decision to lower a short-term lending rate.
However, short-term investors are exercising caution in bidding prices higher due to upcoming critical data and events. These include China’s industrial production, retail sales, and the housing price index for May, which will be announced tomorrow. Furthermore, market participants are eagerly anticipating the latest dot-plot projections from the Federal Open Market Committee (FOMC) today.
Anticipations are that the FOMC will pause rate hikes due to uncertainty regarding the economic outlook and the effects of the ten rate hikes since March 2022. Rate hikes typically strengthen the U.S. dollar, making commodities denominated in the U.S. currency more expensive for holders of other currencies, consequently weighing on oil prices. However, if rate hikes are paused, it is expected to stimulate economic growth and boost oil demand, thereby providing support to prices.
China has recently issued a third batch of import quotas for 2023, resulting in a 20% increase in total volume during the first half of this year compared to the same period last year. The quotas have primarily been allocated to 33 companies, mainly independent refiners, with a total allotment of 62.28 million tonnes. This marks an increase from the 52.69 million tonnes issued by Beijing in June last year and a total released quota of 161.72 million tonnes during the first half of 2022.
On the supply side, U.S. crude oil stocks reportedly rose by about 1 million barrels in the week ending June 9, contrary to the average estimate of a 500,000 barrel decline predicted by analysts. Official government data on stockpiles is scheduled to be released later today. Additionally, OPEC+ has granted Russia a slightly higher oil production baseline, allowing the country to increase its production compared to the previous agreement.
In summary, WTI crude oil prices are experiencing a slight upward trend as investors eagerly await the outcomes of the U.S. Federal Reserve meeting and U.S. crude stockpile data. The market sentiment is influenced by China’s economic data and import quotas, along with interest rate decisions from major central banks. The potential pause in rate hikes by the U.S. central bank could stimulate oil demand and support prices, while supply data and OPEC+ developments continue to impact the market.
WTI Oil is trading higher on Wednesday and within striking distance of the $69.97 (PIVOT).
Retaking $69.97 will stabilize the market after a steep sell-off earlier in the week. If the move is able to generate enough upside momentum then look for a near-term surge into $73.26.
The inability to overcome $69.97, however, will indicate that sellers are still in control. This could create the downside momentum needed to extend the selling into the next major target at $63.82 (S1).
Resistance & Support Levels
S1 – $63.82 | PIVOT – $69.97 |
S2 – $57.52 | R2 – $76.28 |
S3 – $51.37 | R2 – $82.42 |
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.