Based on the EIA’S weekly crude oil Inventory count, demand for crude oil surged in the week of 28 July. A massive drawdown of 17.049M barrels was recorded, exceeding expectations and the prior week’s reading many times over.
The WTI Crude Oil Futures (NYMEX: CL) is on an impressive run and closing in on a sixth consecutive week of gains. Driving the oil futures higher is the supply limitations imposed by the OPEC+ countries in their attempt to shore up oil prices. In addition, a potential peak in U.S. interest rates has opened the door to appetite for risk assets.
With the Nonfarm Payrolls looming, traders will likely be at tenterhooks as they attempt to ascertain what the interest rate policy outlook for the biggest economy in the world could look like and what impact it could have on the oil futures amid the surge in demand.
After taking a knock in Wednesday’s trading session on the back of robust U.S. labour market data, which boosted the Greenback, the oil futures staged a comeback, recovering most of the losses. The oil futures are in a firm uptrend, trading well above the 100-day moving average.
The sharp sell-off from the 82.43 per barrel level (BLL) established a resistance level just below the major resistance of 83.53 BLL. The market discovered support at the 78.61 BLL level, which coincides with the 50% Fibonacci Retracement level, where demand outweighed supply leading to a move higher for the oil futures.
Given the ongoing upside momentum, optimistic crude oil traders will likely eye the 82.43 BLL level with interest. In contrast, if upside momentum gives, potentially on the back of upbeat Nonfarm Payrolls, the oil futures could falter, leaving the 78.61 BLL level probable.
Given that the output cuts by OPEC+ is taking full effect on the supply-demand balance, the upside could be likely for the oil futures, leaving the 82.43 BLL level probable. However, if the NFP surprises to the upside of consensus by a wide margin, further rate hikes could be in the books, as the Federal Reserve aims to moderate the labour market. In that case, the 78.61 BLL level is probable.
Sources: EIA, TradingView, Reuters
DISCLAIMER: This report has been prepared by Fairmarkets International (“The Company”). This document is not intended as an offer, solicitation or recommendation to buy or sell financial instruments or to make any investment. The Company has used reasonable efforts to obtain information from reliable sources and the report is provided without representation or warranty of any kind (neither expressed nor implied). The Company and Fairmarkets International disclaims liability for any publication not being complete, accurate, suitable and relevant for the recipient. Specifically, the Company and Fairmarkets International disclaims liability towards any user and other recipients of this report.