Oil Dips On Surprise Fuel Build, Weak Demand

Fundamental Analysis

* Crude Conundrum: Crude oil prices continue to experience selling pressure as the U.S. government reported weak fuel demand alongside an unexpected rise in gasoline and distillate fuel inventories. Despite U.S. crude stocks falling more than expected last week with refiners operating at their highest rates in over nine months, gasoline and distillate stockpiles increased surprisingly due to weakening demand despite higher production. The EIA reported a 2% drop in gasoline demand from the previous week, down to 9.15 million barrels per day. This weakness in gasoline markets has dragged down the entire oil complex. Additionally, oil prices are further pressured by a subdued investor risk appetite amid potential delays in monetary easing in the U.S. and Europe.

Technical Analysis

* Technical Breakout: Crude oil price was traded lower following prior breakout below previous support level 77.90. MACD which illustrate persistent bearish momentum signal suggest the commodity to further extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 75.95. Conversely, a potential retracement is also to be expected and the price could head back towards 79.35 should the price breach back above the 77.90 level.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

Moving forward, the market’s attention will be on the upcoming meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), scheduled to take place virtually on June 2. The cartel is widely expected to maintain its current pace of production cuts beyond the end-June deadline. Additionally, purchasing managers index data from China, the world’s largest oil importer, is due on Friday, offering further economic cues and demand signals from the country.

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Monitoring

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.