- Weak China data and surging US output remain a drag on oil.
- But oil manages to derive support from broad-based US dollar weakness.
WTI (oil futures on NYMEX) regained the bid tone in the European session, extending its gradual rise into a fourth day today, despite the ongoing concerns over surging global oil output, including from the US.
Another rise in the US oil production was reflected by the latest the Energy Information Administration (EIA) data, which showed that the US output levels hit a weekly record of 10.9 million bpd last week.
The positive tone around the black gold can be mainly attributed to ongoing sell-off in the US dollar versus its main peers, fuelled by expectations that the Fed could end its tightening policy sooner-than-expected after its left the neutral rate unchanged at its monetary policy meeting held a day before.
However, the upside remains capped amid weakening Chinese demand and fears of China slowdown after the world’s no. 2 oil consumer reported a sharp decline in the industrial output and retail sales. Meanwhile, China reported a drop in refinery activity, from 12.06 million barrels per day (bpd) in April to 11.93 million bpd in May, although year-on-year runs were still up by 8.2 percent, according to Reuters.
Next of note remains the US retail sales data and rigs count data for near-term trading opportunities in the USD-sensitive oil.
WTI Technical Levels
Joshua Gibson, FXStreet’s Analyst noted: “The next hurdle to overcome for bulls is 66.85, the May 1 key swing low. If the bulls fail to break above this level we might see a consolidation phase in the coming days with supports seen at the 66.00 figure and 65.56 May 31 low. For now, the momentum remains bullish as Crude oil WTI is currently supported by the daily 100-period simple moving average.“
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