- Oil benchmarks rose by more than 5% in June
- They’ve started July with further gains
- Still, the WTI market remains well within its broader long-term range
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Crude oil prices started July with some gains on Monday, as hopes for strong northen-hemisphere summer demand and ongoing output cuts put a floor under the market even after a strong month of gains.
Both the United States’ West Texas Intermediate and international bellwether Brent added more than 5% through June. These gains came despite enduring worries about the health of the global real economy and, by extension, energy demand, and a serious reining-in of interest- rate cut expectations in the US.
So, what was behind their vigor? Well, the Organization of Petroleum Exporting Countries and its allies agreed last month to extend price-boosting production cuts into 2025. This led some analysts to forecast severe pressure on supply and a drawdown of stockpiles in this year’s third quarter. This factor is clearly still supporting the market, even as supply from sources outside so-called ‘OPEC plus’ countries continue to weaken that groups’ grip on prices.
Sadly, conflicts between Russia and Ukraine and Israel and Hamas and its proxies continue to keep upward pressure on oil prices, as do political uncertainties. Many major countries will see key votes in the year’s second half, culminating of course with the US. France already has the process under way.
Near-term trading cues will include Monday’s look at US manufacturing from the Institute for Supply Management. However, this is likely to be a mere warm-up act in the current, monetary policy obsessed environment for Federal Reserve Chair Jerome Powell, who will speak on Tuesday.
Last week ended with a snapshot from the Energy Information Administration which showed both production and demand for major petroleum products had his four-month high in April.
There isn’t another OPEC ministerial meeting on the sked next year, which will leave the market reliant on the group’s monthly reports.
US Crude Oil Technical Analysis
Prices have nosed above psychological resistance at $82, continuing the run of gains which have seen them rise by close to $10 since the beginning of June. That rise has taken the market above the downtrend line from the peaks of mid-June 2022, where it remains.
Focus now is on the broad range top from November last year, at $83.22. This range has been broken above since, but it tends to be traded back into quite quickly when it is. However, for now the market seems to be settling into a shorter-term range between 80.45 and $82.20.
The direction in which this range breaks will likely be important for near-term direction, so keep an eye on that as July gets going.
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