WTI heading towards a key area of daily support

At $118.58, the price of West Texas Intermediate (WTI) crude oil is lower in Tokyo and the bears are advancing towards a potential support structure on the daily chart in what has been a 23.6% Fibonacci correction so far. The price has been pressured due to Saudi Arabia hiking the premium it charges for exports to Asian customers.

Demand from importers as China lifts lockdowns on Shanghai and other centres enabled the price of oil to move higher at the start of the week, but the bulls have been cashing in over New York trade and through the Asian session so far. Last week, the OPEC+ group announced that it would double its monthly quota increases for members to 648,000 barrels per day in July and August. However, it is noted that Russia and other members are unable to boost output, meaning actual production increases will be just more than 100,000 bpd.

''Energy supply risk continues to rise. After all, pent-up demand for mobility continues to fuel a recovery in energy demand with little evidence of demand destruction from higher prices,'' analysts at TD Securities explained.

 ''We've reiterated that Chinese mobility likely troughed in April, before making substantial improvements by early-May, but continues to improve with our tracking of congestion data for China's top 15 cities by vehicle registrations pointing to a +1.3% improvement in mobility on the week. In this context, supply continues to underwhelm. After all, with only a few Gulf nations effectively holding spare capacity, the OPEC+ group's decision to open their taps at a faster clip result in an underwhelming number of barrels hitting the market, with operational constraints biting into supply for many producers.''

''Meanwhile, the market is awaiting further clarification regarding how the EU and UK will adopt a ban on insurance for Russian oil cargoes,'' the analysts added. ''We reiterate that this will create a significant logistical bottleneck for Russian crude exports, likely resulting in an immediate drop in exports, but may also impact long-term contracts. In this context, we remain long Dec23 Brent crude in anticipation of a continued rise in supply risk premia.''

WTI technical analysis

The bears are closing in on the support structure and should the bulls commit to here on a daily basis, this could be the making s for a continuation to the upside for the days ahead.