Crude Oil: Check key trading strategy on June 13, target price and more

The WTI holding on to support of $78 in Asian hours, retreating from three weeks high of $79.12. hit on Wednesday

Crude oil retreats amid inventory buildup 

Crude oil prices are showing some sign of weakness on Thursday’s trade owing to unexpected buildup in weekly crude oil inventories, although prices are up 3 per cent for the week so far following three consecutive weekly declines. The WTI holding on to support of $78 in Asian hours, retreating from a three week high of $79.12. hit on Wednesday. U.S. crude stocks posted a surprise build last week, up by 3.7 million barrels to 459.7 million barrels and Gasoline stocks rose more than expected, up by 2.6 million barrels to 233.5 million barrels. While gasoline demand in the US has again surged up to 9 mbpd last week.

Demand outlook
 

EIA raised its demand forecast for 2024, by 1.1mbpd (May) from 0.9 mbpd (April)  and NON-OPEC + supply is expected to expand by 1.2 mb/d in 2024 to average 53.0 mb/d lead by US liquids supply growth for 2024. Global oil inventories fell by an estimated 0.3 million barrels per day (b/d) in the first half of 2024 (1H24), and we expect they will decrease by an average of 0.6 million b/d from 3Q24 through 1Q25. U.S. crude oil production will grow by 2 per cent in 2024 and average 13.2 million barrels per day (b/d) for the year and a further 4 per cent in 2025

OPEC
 

Total OPEC-12 crude oil production averaged 26.63 mb/d in May 2024, 29 000b/d higher, M-o-M.  while total OPEC+ output fell by 123000 b/d MoM to 40.92m b/d.  Total non-OPEC+ members crude oil production averaged 14.29 mb/d in May 2024, 152000 b/d lower, M-o-M. The global oil demand growth forecast for 2024 remained unchanged from last month’s estimates at 2.2 mb/d at 104.5 mbpd. global oil demand is forecast to grow by an average of 2.3 mb/d, Y-o-Y, in 2H24. bolstered by strong demand for air travel and healthy road mobility, including trucking. Support is also expected from industrial, construction and agricultural activities in non-OECD countries non-OECD oil demand is forecast to grow on average by 2.1 mb/d, Y-o-Y, in 2H24, China and India expected to be the primary oil demand driver

China’s Demand
 

China’s crude imports improved on a monthly basis in May to 11.06 million barrels daily, which was an increase in the April average of 10.88 million bpd, suggesting an uptick in demand. Yet the May average was also below the 12.11 million bpd average for May 2023, but first five months imports were down by 130,000 bpd from a year earlier.

Economic data
 

The fall in energy prices since April is reflected in May’s CPI reading as inflation remained flat, followed a 0.3 per cent increase in April and Y-o-Y advanced to 3.3 per cent from 3.4 per cent of April.  The monthly core CPI rose 0.2 per cent and 12 months rose 3.4 per cent. easing of inflation once again raise the odd for a September rate cut, but the US Fed. Powell emphasised that the committee needed more data like that to regain the confidence that inflation will return sustainably to 2 per cent. the FOMC left policy rates unchanged for the seventh straight meeting with the fed funds target range at 5.25 per cent-to-5.50 per cent.

Outlook
 

The short-term outlook for prices looks range bound between $77$-$80, while China is still struggling with the property market and it may take a few more months to see economic traction, the supply side remains plentiful. Total OECD commercial oil stocks in May were up by 16.6 mb, M-o-M. At 2,773 mb signalling shrinking demand but next three months could see strong summer demand expectation from northern hemispherical countries hence medium term WTI could test resistance of $82.

(Mohammed Imran is a research analyst at Sharekhan by BNP Paribas. Views expressed are his own)