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Crude Oil News Today: Gains Support as Bulls Await Next Catalyst

By:
James Hyerczyk
Updated: Jun 10, 2024, 13:54 GMT+00:00

Key Points:

  • Oil prices rise slightly on Monday, driven by summer fuel demand hopes but limited by a strong dollar.
  • Goldman Sachs projects Brent crude to hit $86 per barrel in Q3, citing strong summer transport demand.
  • Despite OPEC+ production cuts, oil inventories increase, raising concerns about additional supply pressures.
Light Crude Oil Futures

In this article:

Oil Prices Edge Higher on Summer Demand Hopes

Oil prices inched up on Monday, buoyed by expectations of increased fuel demand during the summer, but gains were limited by a stronger dollar, driven by diminishing hopes for imminent U.S. interest rate cuts. This slight increase follows last week’s two-day rally, which ended with a minor loss on Friday, marking a third consecutive weekly decline.

At 10:15 GMT, Light Crude Oil futures are trading $75.62, up $0.09 or +0.12%.

Analysts’ Projections

Goldman Sachs analysts forecast Brent crude to rise to $86 per barrel in the third quarter. They cite robust summer transport demand as a key factor, projecting a third-quarter deficit of 1.3 million barrels per day (bpd). Additionally, energy consultancy FGE anticipates oil prices reaching the mid-$80s in the third quarter. These projections suggest that the market’s current pessimism might be overdone, especially with expected declines in oil inventories in the coming weeks.

OPEC+ Production Concerns

Despite ongoing OPEC+ production cuts, oil inventories have been rising. The latest data showed an increase in U.S. crude and gasoline stocks. Concerns are mounting over OPEC+’s plan to unwind some production cuts from October, potentially adding to the rising supply and exerting downward pressure on prices. The recent OPEC+ meeting has contributed to a bearish sentiment, with crude prices falling last week despite reassurances from key members like Saudi Arabia and Russia.

Impact of the Strong Dollar

The strengthening dollar has also weighed on oil prices. The dollar rallied following a robust U.S. jobs report, leading investors to reassess the likelihood of near-term interest rate cuts. A stronger dollar makes oil more expensive for holders of other currencies, dampening demand. The euro, conversely, weakened after French President Emmanuel Macron called for a snap parliamentary election, further bolstering the dollar.

Mixed Economic Signals

Various economic indicators have sent mixed signals to the oil market. The European Central Bank’s recent interest rate cut, the first since 2019, aims to address uncertain inflation, though high borrowing costs could slow economic activity and reduce oil demand. Meanwhile, China’s latest trade data showed a drop in oil imports despite strong export growth, highlighting ongoing demand concerns.

Market Forecast: Cautiously Bullish

Given the expected rise in summer transport demand and projected inventory declines, the short-term outlook for oil prices appears cautiously bullish. However, the market’s response will depend heavily on concrete signals of tightening from inventory data and the impact of the strong dollar. Traders should watch for further updates on OPEC+ production plans and global economic developments to gauge the market’s direction.

Technical Analysis

Daily Light Crude Oil Futures

All three major trend indicators are pointed lower so the rally we’re looking it is being driven by aggressive counter-trend buying. Some of it new longs, some short-covering.

From a longer-term perspective, the rally is being fueled by speculators looking for value. Essentially, they liked the price enough to put a floor underneath the market. However, traders are still looking forward to the next bullish catalyst.

Overcoming the pivot at $76.41 will be another sign of strength, but in order to turn bullish again, the buying is going to have to be strong enough to overcome the 200-day moving average at $78.13 and the 50-day moving average at $80.14.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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