WTI and Brent Rally Gains Steam Despite the IEA Increasing 2023 Supply Outlook

WTI Crude Oil Price, Charts and Analysis:

Most read: US Inflation Rate YoY Falls To Low In Two Years But Core CPI Holds Flat, DXY Edges Lower

WTI Crude Oil, Brent Core Outlook

Crude Oil finally found support yesterday with a strong bounce seeing WTI close the day with gains around the 2.9% mark and below the psychological level of $70.00 per barrel. This morning saw a continuation of the bounce thanks in part to a weak US dollar as market participants head ahead of the FOMC meeting.

American Petroleum Institute (API) data released from the US showed an increase of 1.02 million barrels with data from the Energy and Information Administration (EIA) later in the day. We also got the updated data from the US on the Strategic Petroleum Reserve (SPR) yesterday which indicated a 33% decline from where it was 12 months ago.

Meanwhile, the International Energy Agency released its market report this morning, raising its supply forecast for 2023 by 200,000 barrels per day (bpd) to 101.3 million bpd, while revealing that global oil supply slumped in May due to OPEC+ cuts. However, demand concerns have been the dominant influence on markets lately with the sell-off in the past weeks largely driven by signs of a slowdown in the global economy. Renewed concerns about China as inflation data and retail sales remained weak, but IEA data this morning may go some way to easing concerns. The International Energy Agency revealed that Chinese demand for oil in April continued to rise, reaching record highs of 16.3 million barrels per day.

Side risks for WTI and Brent

Of course, one does not have to look far for the most pressing downside risks to oil prices right now. Action will be dominated by the FOMC meeting later today as markets are fully anticipating a pause, however the economic outlook and press conference could raise a surprise or two. A ‘hawkish’ stop from Fed Chair Powell seems likely as markets prepare to resume rate hikes at the Fed’s July meeting. Such a move could further support the dollar and thus affect oil prices. A cautious pause seems unlikely at this point given that core inflation continues to be a concern and the labor market is strong while a sudden 25bp rise could send the dollar higher as well.

There is US PPI and EIA stock data to be released before the FOMC meeting that may keep market participants busy ahead of the main event.

For all the economic data and events that move the market, see DailyFX calendar

Technical outlook and final thoughts

From a technical perspective, both WTI and Brent are giving slightly mixed signals at the moment. WTI hit its lowest since May 24 near 74.63 with the only anomaly being a higher open price after OPEC production cuts earlier in the month. The gains of course were wiped out in one day before continuing to post recent lows around the 66.80 handle, which was the lowest daily close since March 17th.

Yesterday the price had a sharp rebound with the closing of the daily candle as a bullish inside bar pattern indicates more bullishness coupled with a double bottom pattern on the daily chart as well. The reason I mentioned mixed signals a bit early is simply because we just printed a new lower low, but the closing of the inside bar candle combined with the double bottom pattern indicates a strong rally to the upside. There is a bunch of areas of resistance that could come into play if we see an extended rally with 71.50, 73.00 and of course the 50 day EMA near the 74.19 mark is likely to be stubborn. There is a lot to watch as we head into the FOMC meeting.

WTI Crude Oil Daily Chart – Jun 14, 2023

Source: TradingView

Customer Sense Data IG

IGCS shows that retail traders are currently inclined to buy WTI Crude Oil, with 86% of traders currently holding long positions. At DailyFX, we usually take a view contrarian to crowd sentiment, and the fact that traders are long suggests that WTI may enjoy a brief rebound before continuing lower.

Written by: Zain Fouda, market writer for DailyFX.com

Connect with Zain and follow her on Twitter: @employee