Crude Oil Price Analysis

Oil prices experienced a sharp decline over the past week, with Brent crude falling below $80.60 per barrel. This represents a drop of over $7 from the peak reached on July 5th.

Several factors have contributed to this price decrease. A significant portion of the decline can be attributed to growing concerns among traders about global oil demand.

• Recent economic data from China, a major oil consumer, has shown signs of weakness, fueling these concerns.

While May's global oil demand reached a record high of 102.5 million barrels per day, it fell slightly short of analysts' expectations.

Decline in oil demand was observed in several key countries, including

• Canada
• OECD Europe
• Saudi Arabia

However, the weakness in demand appears to be isolated to specific regions rather than indicative of a broader trend.

Another factor impacting oil prices is the behavior of Commodity Trading Advisors (CTAs), who have recently shifted towards shorting oil contracts. This activity has further exacerbated the price decline.

Oil Demand Remains Strong Despite Price Drop

• Oil demand is increasing
  Analysts predict a significant increase in oil consumption of 1.6 million barrels per day in July, which suggests that global economic activity is robust and drives up the need for energy.
• Oil inventories are declining
  This is generally a bullish sign for oil prices. It means that the supply of oil is tightening, which can potentially lead to higher prices in the future.

Why is this surprising given the recent price drop?

It might seem counterintuitive that oil demand is increasing while prices are falling. However, there are several reasons

• Increased supply
  A temporary increase in oil production, perhaps due to new wells coming online or OPEC+ adjustments, could be putting downward pressure on prices, even with rising demand.
• Economic concerns
  There might be growing concerns about a potential economic slowdown, which could be tempering investor optimism and driving down oil prices.
• Market speculation
  Short-term market fluctuations can be influenced by factors such as trader sentiment and hedging activities

While the recent price drop might be influenced by short-term factors, the underlying trend of increasing oil demand and declining inventories suggests a positive outlook for the oil market in the long term.

WTI Crude Oil Technical Analysis

The price of WTI crude oil futures has been decreasing. After reaching a high point at $84.70, the price has fallen below two important average prices (the 20-day and 50-day averages) when looking at the price over a day.

The price is currently testing a support level at $75.12. If the price falls below this level, it could continue to decrease towards another support level at $73.41. Indicators RSI and MACD also suggest that the price is likely to continue decreasing.

However, if the price rises above the 20-day and 50-day averages, it could increase to $80.50 and potentially reach $84.70.

Overall, while the price is currently decreasing, the long-term trend is still upward as long as the price stays above the $73.41 support level.