Oil Price Forecast: Impacted by Mixed Economic Data, Supply Concerns

Highlights

• WTI crude oil futures hold steady amid supply concerns and mixed economic data.
• Saudi Arabia extends production cuts, while Russia reduces oil exports.
• Uncertain macro outlook keeps market sentiment cautious in the short term.

Overview

US benchmark West Texas Intermediate (WTI) crude oil futures are holding steady as the market considers supply concerns against mixed economic data that could indicate weak crude demand. The focus is currently on the uncertain macro outlook rather than fundamental factors. In the short term, it is unlikely that this pattern will change significantly, although the additional production cuts from Saudi Arabia and Russia provide support for Brent crude at around $70 per barrel.

Saudi Arabia has announced an extension of its voluntary production cut of 1 million barrels per day (bpd) into August, while Russia will reduce its oil exports by 500,000 bpd during the same period. These cuts, totaling 1.5% of global supply, contribute to the overall reduction of 5.16 million bpd pledged by OPEC+ oil producers. The goal of these cuts is to bolster oil prices.

US markets will be closed on Tuesday due to the Independence Day holiday. In the previous session, oil benchmarks had settled down approximately 1%.

Analysts have mixed expectations regarding macroeconomic indicators. Global factory activity has declined due to sluggish demand in China and Europe, and US manufacturing has also fallen. They are currently nearing levels last seen during the initial wave of the COVID-19 pandemic. However, JP Morgan analysts believe that the US and global economies are not at immediate risk of entering a recession. This is due to a strong services sector, easing financial conditions, and improvements in the US goods sector. Nevertheless, ANZ analysts suggest that weaker economic growth implies weak merchandise demand, which could weigh on distillates consumption.

Short-term Forecast:  Mixed Dynamics

Given the supply cuts from Saudi Arabia and Russia, there is a bullish sentiment in the market, providing a stronger floor for Brent crude around $70 per barrel. However, the uncertain macroeconomic outlook and weak crude demand could dampen prices, leading to a bearish sentiment. It is important to monitor further developments in supply dynamics and economic indicators to gauge the direction of crude oil prices in the near term.

Technical Analysis

The WTI Crude Oil market is currently exhibiting relatively neutral sentiment. The current price of 70.09 is slightly lower than the previous close, indicating a minor downward movement. The price is positioned below the 200-4H moving average but above the 50-4H moving average. The 14-4H RSI reading of 51.39 suggests a balanced market.

The main support area lies between 67.37 and 68.31, while the main resistance area is identified as 72.75 to 73.55. With no clear bullish or bearish bias, traders should closely monitor price action and market developments for further direction.