Oil Price Forecast / Update: Supported by Anticipated China Stimulus, Drop in API Stockpiles

Highlights

• WTI crude oil futures supported by China stimulus hopes
• Expected decline in US crude stockpiles contributes to rise in oil prices
• Investors looking to US inflation report for interest rate direction

Overview

U.S. West Texas Intermediate crude oil futures are putting in a volatilie performance on on Tuesday as traders price in possible economic stimulus from China and robust demand in other parts of Asia, ahead of an anticipated drop in U.S. crude oil stockpiles.

At 11:12 GMT, June WTI crude oil futures are trading $79.67, down $0.10 or -0.13%. On Monday, the United States Oil Fund ETF (USO) settled at $69.77, down $0.49 or -0.70%.

China Considers Stimulus Measures as Inflation Hits 18-Month Low, Producer Prices Drop Sharply

China’s slow economic growth has led to talks of potential stimulus measures as the country’s consumer inflation hit an 18-month low in March, indicating weak demand in an uneven economic recovery.

China’s producer price index (PPI) dropped by 2.5% year-on-year in March, indicating the sharpest decline since June 2020. Consequently, this decline in the inflation rate could potentially provide space for monetary policy easing to encourage demand.

Furthermore, investors are anticipating possible interest rate cuts as the value of China’s yuan against the dollar hit a more-than-one-week low. This decline indicates that there is a growing expectation of monetary easing as a policy response to the drop in producer prices.

Meanwhile, oil prices have risen due to the weakening of the dollar, strong fuel demand in India, and expected declines in US crude stockpiles as reported by the American Petroleum Institute (API). Analysts estimate that crude inventories fell by an average of 1.3 million barrels in the week ending April 7th, and investors are looking to the upcoming US inflation report for clues on the future direction of interest rates.

Daily June WTI Crude Oil Technical Analysis

The main trend is up according to the daily swing chart. A trade through the Jan. 23 main top at $82.98 will reaffirm the uptrend. A move through $64.58 will change the main trend to down. The prolonged move up in terms of price and time puts the market inside the window of time for a potentially bearish closing price reversal top.

The market is currently trading on the weak side of a short-term retracement zone at $78.06 – $75.49, making it support.

Daily June WTI Crude Oil Technical Forecast

Trader reaction to a minor pivot at $80.75 is likely to determine the direction of the June WTI crude oil market on Monday.

Bullish Scenario

Bearish Scenario

A sustained move under $80.75 will signal the presence of sellers. This could trigger a quick break into the short-term Fibonacci level at $78.06.