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Downtrend Confirmed, Yet Market Awaits Upside Mean Reversion
Economic
Commodity
Summary:
The depreciation of the U.S. dollar and an optimistic outlook for trade negotiations have propelled oil prices upward. Upward revisions to crude oversupply expectations and downward adjustments to oil price forecasts.
Buy
CLOSEDWTI
End Time
59.985
Entry Price
68.260
TP
56.400
SL
60.368 +0.478 +0.80%
3585
Points
Loss
56.400
SL
56.400
CLOSING
59.985
Entry Price
68.260
TP
Fundamentals
Encouraged by the weak U.S. dollar and the positive prospects for U.S. tariff negotiations, WTI crude oil prices have risen for the second consecutive day. During Thursday's Asian session, WTI traded around $62.50 per barrel. However, macroeconomic headwinds may cap the price recovery, despite optimism regarding potential tariff reductions. Meanwhile, the increase in U.S. crude oil inventories signals ample supply. Without broader market support, crude oil prices are likely to remain near current lows.
Additionally, as demand expectations are pressured, OPEC+'s decision to accelerate production increases in May, beyond market expectations, is notable. We believe this production increase may be influenced by external factors such as political and geopolitical considerations, which will exacerbate the oversupply pressure in the crude oil market.
High-frequency data indicate that since March, the number of active U.S. oil rigs has begun to decline, suggesting that the cost challenges for North American shale oil may have arrived. Considering the fundamental changes since the beginning of the year, we have revised our full-year oil supply-demand surplus expectation upward to 670,000 b/d and lowered the annual Brent oil price midpoint to $70 per barrel. The projected midpoints for the second to fourth quarters are $67.50, $72.50, and $65.00 per barrel, respectively.
Furthermore, if global economic growth is further pressured by trade frictions, it could bring an additional $5 downside risk to oil prices.
Technical Analysis
In the broader time frame, after WTI crude oil broke below $57.21 per barrel, prices have continued to exhibit bearish momentum. Currently, oil prices are hovering around $62.50. The current price action indicates that following a significant downtrend in early April, the market is currently in a phase of mean reversion to the upside.
The chart shows resistance around $63.00. Over the past week, this resistance level has repeatedly capped upside attempts. The recent price action appears to have formed a potentially bearish inverse head-and-shoulders pattern, adding uncertainty to a further breakout above the $63.00 neckline.
In terms of momentum, the stochastic oscillator readings are hovering slightly above the midpoint of its range, with momentum strengthening but not yet turning positive. This suggests that the market is neither overbought nor oversold. However, the recent decline indicates that energy is likely to develop to the upside.
Investors should closely monitor a potential breakout above $63.00, as a breach of this resistance level could trigger a faster pace of upward mean reversion.
Trading Recommendations
Trading Direction: Buy
Entry Price: 60.00/61.00
Target Price: 68.60
Stop Loss: 56.40
Valid Until: May 2, 2025, 23:55:00
Support: 61.43/60.50/58.33
Resistance: 63.00/64.29/66.50
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