Oil Price Slips On Sluggish Fuel Demand

Fundamental Analysis

* Demand Doldrums: Oil prices extended its decline following indications of sluggish fuel demand, coupled with remarks from U.S. Federal Reserve officials that tempered expectations of interest rate reductions. This potential lack of rate cuts could impede economic growth and limit fuel demand in the world’s largest economy. Analysts predict that the Federal Reserve will maintain its current policy rate for an extended period, bolstering the strength of the dollar. A stronger dollar increases the cost of dollar-denominated oil for investors using other currencies. Additionally, oil prices declined because of weak demand signals. This was evidenced by the increase in U.S. gasoline and distillate inventories leading up to the commencement of the U.S. driving season. Refiners globally are grappling with reduced profits for diesel due to heightened supplies from new refineries and subdued demand resulting from mild weather in the northern hemisphere and sluggish economic activity.

Technical Analysis

* Technical Breakout: Crude oil price was traded lower while currently testing the support level 77.90. MACD which illustrate bearish momentum signal with the formation of death cross suggest the commodity to extend its losses after it breaks below the support level.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 75.95 after it breach below the level 77.90. Conversely, a potential correction is also to be expected and the price could head back towards the level 80.80.

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

Potential Risks

Moving ahead, investors will remain attentive to economic indicators, particularly from the U.S and the ongoing tension in the Middle East, which could potentially influence the supply and demand dynamics of crude oil. Despite efforts, a cease-fire agreement between Israel and Hamas has yet to be reached. Additionally, there’s been a statement from U.S. President Joe Biden suggesting the suspension of weapons shipments to Israel if a significant assault on the southern Gaza city of Rafah occurs.

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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.