Crude oil prices moderated on Monday, closing 1% lower at $82.33, following a 2.1% gain the previous week. The stronger dollar played a key role in this decline. Additionally, concerns about Hurricane Beryl disrupting oil operations in the Gulf of Mexico subsided after the storm made landfall in Texas and weakened into a tropical storm.
Macro Data Influences
The latest economic data was not supportive of crude oil demand. U.S. hiring showed signs of slowing, and Monday’s global economic news was weaker than expected, contributing to bearish sentiment for energy demand and crude prices. The Eurozone’s July Sentix investor confidence index dropped to a four-month low of -7.3, significantly below the expected -0.5. In Germany, May exports fell by 3.6% month-over-month, marking the largest decline in five months and missing expectations of a 2.8% drop. Market attention is now focused on upcoming U.S. CPI data, weekly jobless claims, PPI, and the preliminary University of Michigan Consumer Sentiment index, alongside both short-term and long-term inflation expectations.
Global Supply Factors
Crude oil demand in China weakened during the week , with only 86 global oil tankers indicating China as their next destination, five fewer than the previous week and the lowest weekly tally since August 2022. This reduction in demand from the world’s second-largest crude consumer is bearish for oil prices. Additionally, higher-than-expected Russian crude output and exports have also pressured oil prices. Russian fuel exports in the week to June 30 increased by 620,000 barrels per day (bpd) to 3.67 million bpd, the highest in two months. Data from Vortexa showed a significant rise in the amount of crude oil held worldwide on stationary tankers, increasing by 11% week-over-week to 86.58 million barrels as of July 5.
Baker Hughes reported that the number of active U.S. oil rigs remained unchanged at 479 for the week ending July 5, a 2.5-year low. The number of U.S. oil rigs has been declining over the past year from a four-year high of 627 rigs in December 2022. Both the EIA and OPEC are set to release their monthly oil reports this week, with early surveys indicating that OPEC’s June crude production fell by 80,000 bpd to 26.98 million bpd.
Outlook and Market Reactions
Hurricane Beryl’s weakening into a tropical storm after hitting the Texas coast has alleviated market concerns about potential disruptions in a region responsible for 40% of U.S. crude oil production. The ongoing ceasefire talks between Hamas and Israel, mediated by Qatar, could further ease market risk premiums by a couple of dollars if a concrete outcome is reached.
WTI crude oil gained 2.1% last week after the Energy Information Administration reported a decline in stockpiles of crude and refined products for the week ending June 28. Despite this recent strength, technical charts suggest WTI could face strong resistance at $86.50, with potential for further sell-offs before the next rally. For August, WTI crude oil is expected to find support at $80 and resistance at $85. Similarly, MCX crude for July has support at 6780 and resistance at 7100.
Related topics:
Brent Crude Oil Targets Key Levels Amid Fibonacci Correction
