Crude Oil price gaps lower at the start of the week on concerns global growth may suffer, after the world’s leading economies antagonized China at the G7 summit in Hiroshima. World leaders discussed ‘de-risking’, or weaning themselves off an over-reliance on Chinese imports at the summit. Washington and Beijing exchanged harsh words as China banned imported chips from US manufacturer Micron, after failing to pass a security test. Support from a weakening US Dollar, however, lifts Crude Oil back up to Friday’s close after the weak open.
At the time of writing, WTI Oil is trading in the upper $71s and Brent Crude Oil in the mid $75s.
- China provokes the United States by banning US-manufactured micro chips.
- Oil recovers after US Dollar weakens on continued debt-ceiling uncertainty as talks reopen in Washington.
- Crude Oil Juggles Below $72.00 Ahead of Biden-McCarthy Talks
Crude Oil news and market movers
- Oil price falls on global growth and trade concerns after major economies clash at the G7 summit in Japan.
- China provokes the US by banning imports of micro chips from US manufacturer Micron, citing security risks.
- Geopolitics polarizes the G7 into two competing camps – China and Russia, who are seen as threats to world prosperity and peace – and the rest, led by the United States.
- Oil price subsequently recovers, however, supported by a weaker US Dollar.
- The Greenback remains under pressure as the debt-ceiling impasse trundles on.
Crude Oil Technical Analysis: Downtrend showing signs of ending
WTI Oil is in a long-term downtrend, making successive lower lows. Given the old adage that the trend is your friend, this favors short positions over long positions. WTI Oil is trading below all the major daily Simple Moving Averages (SMA) and all the weekly SMAs except the 200-week which is at $66.89.
A break below the year-to-date (YTD) lows of $64.31 would be required to reignite the downtrend, with the next target at around $62.00 where trough lows from 2021 will come into play, followed by support at $57.50.
Despite the bearish trend dominating, there are signs pointing to a possible conclusion. The mild bullish convergence between price and the Relative Strength Index (RSI) at the March and May 2023 lows – with price making a lower low in May that is not matched by a lower low in RSI – is a sign that bearish pressure is easing.
The long hammer Japanese candlestick pattern that formed at the May 4 (and year-to-date) lows is a sign that it could be a key strategic bottom.
Oil price bulls, however, would need to break above the $76.85 lower high of April 28 to bring the dominant bear trend into doubt.
Like all assets supply and demand are the key drivers of Brent Crude Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of Brent Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world’s internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
