- Summary:
- Crude oil prices are on course to rise for the fifth successive week as soft US economic data pressure the dollar and summer demand soars.
Oil prices kept their upward tempo on Friday, with Brent by 0.4 percent at press time to trade at $85.90 and West Texas Intermediate (WTI) up by 0.8 percent to trade at $83.30. The commodity’s demand side looks strong in the summer, with the weak US dollar fundamentals likely to provide propulsion for a stronger upward push. Friday’s gain put oil on course to extend its winning streak to the fifth successive week, the first such streak in a year.
The US inflation rate declined more than expected in June, weakening the US dollar, and raising the prospects of increased demand for dollar-denominated crude oil. Meanwhile, US crude oil inventories declined for the second successive week in the week ending July 3, cementing forecasts of increased demand during the summer. Stockpiles declined by 3.443 million barrels, substantially more than the forecast increase of 700k barrels.
However, two of the leading authorities in the global oil industry gave contradicting outlooks for oil demand this week. The International Energy Agency (IEA) stated in its monthly oil report that the global oil demand growth will likely slow down to 970k barrels per day (bpd) this year, and cut growth forecast for 2025 by 50k bpd. On the other hand, OPEC maintained a strong demand growth forecast, putting the figure at 2.25 million bpd. Similarly, to IEA, however, OPEC also expects demand growth to slow down to 1.86 million bpd in 2025. Overall, China’s demand will be central to determining the accuracy of these estimates.
Technical analysis
The momentum on Brent crude oil price signals a continuation of the upside if the commodity stays above 85.78. The upside will likely encounter the first resistance at 86.13, but the buyers could break the barrier and take the price higher to test 86.32 if they extend their control. On the other hand, a move below 85.78 will signal likely control by the sellers. If that happens, the downside could find the first support at 85.53. A breach of that mark will invalidate the upside view and could extend the downside to test 85.22.
