- Summary:
- China's Industrial production dropped significantly in May, impacting the positive summer-driven demand forecasts for oil price.
Crude oil prices were range-bound on Monday as markets weighed the implications of mixed Chinese economic data and strong summer demand outlook. West Texas Intermediate was down by 0.3 percent to trade at 478.19 per barrel, while Brent crude was flat to trade at $82.57 per barrel at the time of writing. Crude oil prices have been on the ascent for the last two weeks, and registered its first gain on the weekly chart last week, after snapping a three-week losing streak last week.
China’s Industrial Production fell in May, coming in at 5.6 percent from April’s 6.7 percent, and falling short of the forecast figure of 6.2 percent. This signals potential decline in demand from the world’s largest importer of crude oil if the trend continues. On the other hand, however, retail sales grew by 3.7 percent, exceeding the forecast 3.0 percent. That points to some form of stability in the Chinese economy which started the year on a weak footing with pressure from a weakened property market. Traders will, therefore, have to take a cautious approach to their exposure to oil prices, in view of the mixed figures from China.
Meanwhile, the bulls are counting on increased demand during the summer to drive up prices. However, that might take some time to gather momentum, considering that US inventory figures released last week showed a spike in crude oil stockpiles by more than 3.7 million barrels, against a projected decline of 1.2 million barrels. On the other hand, OPEC maintained its demand forecast for crude oil in 2024, providing support for oil.
Technical analysis
Brent crude oil price pivots at 82.63, and the downtrend will likely see the first support established at 82.26. A breach of that mark will strengthen the downside momentum, and could see the price action test 82.02. Conversely, a move above 82.63 will favour the buyers to be in control, and the upward momentum is likely to encounter resistance at 83.00. A break above that mark will invalidate the downside narrative, and could result in further gains to test 83.25.
