Weekly Crude Oil Forecast: Crude price has been trading in the range of 5600-6100 for the past one week. Both bulls and bears are on even footing as OPEC+ production cut will tighten oil market in second half of the year while US debt ceiling and fall in demand anticipation is keeping prices under check. US inventory is also falling giving a boost to prices but the overhang of debt ceiling and Chinese weak factory data is keeping prices from rallying further on the upside.
- Crude Oil price reverses gains and marks a decline on Friday after Republicans walked out debt-ceiling talks with President Biden.
- The US Dollar dips as safe-haven demand dries up on easing debt-ceiling worries, Oil is mainly priced in USD.
- Downside for the US Dollar is likely to be contained amidst heightened inflation expectations.
- Crude Oil price is in a technical downtrend, favoring shorts, although there are signs a bottom may be forming.
- Crude Oil Prices: Analyzing the Impact of a Strong Dollar and Sticky Inflation
There is positive news for crude which is that global oil demand reached its highest on record in March. Global oil demand was by 3 million barrels per day (bpd) in March compared to February and hitting the highest level on record. Global oil inventories also dropped in March, pointing to a tightening market ahead. However, prices have not reacted to this data because Chinese demand is due to import from Russia which is providing at discount and there are macroeconomic concerns that the world is heading into recession.
With the implementation of the additional 1.16 million bpd OPEC+ production cuts, output figures are expected to be lower in May/June 2023, but exports may not necessarily follow suit. This week some sentiment improved for crude when the US decided to replenish their reserves for strategic petroleum.
In MCX, crude oil prices are taking resistance around its 20 and 50-day moving average. On a daily scale, the trend still is neutral to bearish courtesy of lower top formation. However crude has made higher bottom formation indicating some sort of bottom formation.
Crude has immediate resistance at 6100 and 6300 while support at 5800 and 5600. Range trading can be initiated where one can go long around the support zone of 5800 with stoploss of 5600 and expected target of 6300 and short position around 6300 with stoploss of 6400 and expected target of 5800. Until a clear direction is not emerging, we would advise to trade in the following range mentioned above.
