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Crude Oil Forecast: Continues to See Volatility

The oil market, at present, is characterized by its noise and volatility. 

  • The West Texas Intermediate (WTI) Crude Oil market made notable strides early on Wednesday, breaking above the $70 mark.
  • However, the sustainability of this upward move remains uncertain. The 50-Day Exponential Moving Average (EMA), currently near $72.75 and descending, may impose a ceiling on market growth.
  • The $75 level is also anticipated to serve as a substantial barrier. Above there, the market continues much higher.

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Market dynamics are largely influenced by debates surrounding the trajectory of global demand. Some predict an increase, while others foresee a downturn due to potential global crises. Notably, China’s increase in its crude oil import quota has fueled Wednesday’s bullish trend for crude oil. The market’s response to this move will dictate whether it can sustain its momentum. At present, trading appears to be confined between $73 and $67.50. I do not think we break out, but it is something that remains to be seen.

Similarly, Brent, also known as UK Oil, demonstrated a rally during Wednesday’s trading session. Its performance mirrors that of the WTI market, driven by the same factors. Brent, however, is likely to be more sensitive to Chinese market changes. The 50-Day EMA for Brent hovers around $77.25 and is declining, outlining the upper limit of the current trading range, with $71.50 offering support beneath. The $70 level is expected to serve as a crucial benchmark.

The oil market, at present, is characterized by its noise and volatility. However, a significant breakout is anticipated given enough time. This is unlikely to occur imminently, as the market is currently operating within what is typically considered a summer range. Demand remains tepid, matched by weak supply. This scenario has led to a pattern of short-term fluctuations, which could culminate in a larger market movement later this summer.

At the end of the day, the WTI and Brent oil markets are currently driven by speculation surrounding global demand, with particular emphasis on China’s role. Both markets are witnessing short-term volatility within defined ranges, with key levels acting as potential barriers. Traders should brace for continued volatility, keeping a keen eye on global demand indicators and policy changes. The market’s current fluctuations may be a precursor to more significant moves in the later summer months, necessitating informed and strategic decision-making from traders.

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