USOIL Heads for Weekly Gains despite Negativity
USOil Analysis
US CPI Inflation moderated in May according to Wednesday release, showing that the disinflation process is still on, but that was not enough to sway the Fed away from its higher-for-longer stance. Officials now see just one rate cut this year, hiked the longer-run rate and raised their inflation projections for this year and the next. However, Chair Powell downplayed the upgraded inflation forecast and the strong payrolls in a commentary that did not seem particularly hawkish [1]. That reflected in markets, which currently price in two cuts, starting in September.
At the same time, the International Energy Agency (IEA) downgraded again its demand growth outlook for 2024, to just 960,000 barrels per day (bpd), marking a steep deceleration from last year. At the same time, supply is expected to rise by 690,000 bpd, driven by non-OPEC producers like the US, which is poised for another record output this year [2]. This adds to existing surplus concerns, as OPEC+ recently extended supply cuts, but will start returning oil to the market form the fourth quarter.
However, the actions of OPEC+ can lead to a deficit over the next few months. The green energy transition and EV proliferation erodes demand for oil, but amidst recent "greenlash" and EV adoption slowdown, its appeal remains strong. At the same time, emerging economies like India, are hungry for fossil fuels to sustain their high growth.
USOil was able to look past the negativity and head towards the conclusion of a profitable week. It tries to take out a crucial technical cluster, consisting of the 38.2% Fibonacci of the recent drop, the EMA200 and the descending trend line of the 2024 highs. Successful effort will pause the bearish bias and allow the commodity to look towards 83.89.
However, we are cautious around its ascending prospects and the upside looks unfriendly technically. Although the market is likely to tighten further in the second half of the year, the fundamental outlook beyond that is unfavorable. A rejection of the aforementioned critical resistance area would reaffirm the bearish bias and could send USOil below to new lows (72.45).
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 14 Jun 2024 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240612.htm | |
| Retrieved 17 Apr 2026 https://www.iea.org/reports/oil-market-report-june-2024 |
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