Crude Oil Price Rebound Emerges as US Output Holds Steady Coming into July

[ArvinIG]

CRUDE OIL PRICE TALKING POINTS

The price of oil appears to be reversing course head of the 200-Day SMA ($92.62) as it holds above the April low ($92.93), and crude may stage a larger rebound over the coming days as US production holds steady at the start of July.

CRUDE OIL PRICE REBOUND EMERGES AS US OUTPUT HOLDS STEADY COMING INTO JULY

The price of oil extends the rebound from the weekly low ($95.10) even as US inventories unexpectedly increase for the first time in three weeks, and crude may attempt to retrace the decline from the monthly high ($111.45) as the Relative Strength Index (RSI) bounces back ahead of oversold territory.

However, indications of slowing consumption may produce headwinds for crude as US inventories jump 8.235M in the week ending July 1 versus forecasts for a 1.043M decline, and current market conditions may keep a lid on crude prices as the Organization of Petroleum Exporting Countries (OPEC) plan to “adjust upward the monthly overall production for the month of August 2022 by 0.648 mb/d.”

It remains to be seen if OPEC will retain the current production schedule over the remainder of the year amid the weakening outlook for demand, and developments coming out of the US may influence crude prices as the recent rise in oil output appears to be stalling.

A deeper look at the figures from the Energy Information Administration (EIA) show weekly field production printing at 12,100K for the second week, and signs of limited supply may lead to a near-term rebound in the price of oil as it appears to be reversing course head of the 200-Day SMA ($92.62).

With that said, failure to test the April low ($92.93) may keep the price of oil within a defined range ahead of the next OPEC Ministerial Meeting on August 3, and crude may attempt to retrace the decline from the monthly high ($111.45) as the Relative Strength Index (RSI) bounces back ahead of oversold territory.

CRUDE OIL PRICE DAILY CHART

Source: Trading View

• The price of oil appears to be reversing course ahead of the 200-Day SMA ($92.62) amid the failed attempt to break/close below the Fibonacci overlap around $93.50 (61.8% retracement) to $95.30 (23.6% expansion), and crude may stage a larger rebound as long as it holds above the April low ($92.93).
• The Relative Strength Index (RSI) highlights a similar dynamic as it bounces back ahead of oversold territory, but need a close above the $104.20 (50% expansion) region to bring the $108.10 (61.8% expansion) area back on the radar.
• A move above the 50-Day SMA ($110.10) may push the price of oil towards the monthly high ($11.45), with the next area of interest coming in around $112.80 (161.8% expansion) to $113.70 (78.6% expansion).
• However, failure to close above the $104.20 (50% expansion) region may keep the price of oil within a defined range as the 50-Day SMA ($110.10) no longer reflects a positive slope, with a move below $100.20 (38.2% expansion) raising the scope for another run at the overlap around $93.50 (61.8% retracement) to $95.30 (23.6% expansion).

David Song, Currency Strategist, DailyFX
Follow me on Twitter at @DavidJSong
08 July 2022