While the sentiment around global demand improves, the supply side in the oil market has boosted the WTI futures (NYMEX: CL) to a 15.8% monthly gain in July, its highest monthly move since the opening month of 2022. At a critical technical level, could the momentum continue through August?
The futures have been underpinned by the supply cuts from Saudi Arabia and Russia, which are expected to continue throughout August. The next OPEC+ monthly report could be crucial in its demand assessment for the upcoming months for traders to gauge the imbalance with supply. However, China’s Caixin Manufacturing PMI came in at 49.2 on Monday, declining from 50.5 to miss the 50.3 consensus to the downside. Lower demand from China could be a headwind as we advance, as the economic recovery remains weak. However, some stimulus measures from China could soon unlock additional demand, which could further aid the futures.
Technical
On the 4H chart, a rising wedge has formed, where the futures have bounced off the dynamic resistance toward the daily pivot point at $81.31/BLL. While the uptrend remains strong, the pivot point could be crucial in preventing a breakdown from the wedge.
A breakdown at the pivot could lead the futures toward $80.62/BLL (S1), but a wedge breakdown could need confirmation from another leg below support at $79.92/BLL. In that case, lower support is established at $78.60/BLL and $77.23/BLL.
However, if the wedge holds, the potential for a break above the dynamic resistance remains possible. Resistance is established at $82.49/BLL (R1), and $83.18/BLL (R2) before new multi-month highs could be reached at $84.13/BLL.
Summary
While the supply tailwinds have boosted the WTI futures to three-and-a-half-month highs, weaker manufacturing data from China capped the upside in the Tuesday session. If the pivot point at $81.31/BLL fails to hold, there could be a short-term pullback to $80.62/BLL and $79.92/BLL. However, the uptrend could continue toward $82.49/BLL if buyers are found at the pivot.
Sources: Koyfin, Tradingview, Reuters
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