Pre Open US - US Oil 21 July 2023

The prices have increased by 8.2% since the beginning of the month. This rise can be attributed to several factors, including Saudi Arabia's decision to implement a voluntary export cut of one million barrels per day for July and August, along with Russia's own cuts and tighter quotas for other OPEC+ members. However, these cuts come at a time when developed economies are slowing down due to rising interest rates, which is affecting the demand for oil.

China, as the top importer, has also played a role in keeping prices below the 2023 high of US$83.26 per barrel reached in mid-April. The weak growth in China has been a contributing factor. Nevertheless, the country is taking measures to stimulate its economy, such as introducing support measures for car and electronics purchases. However, it remains uncertain whether these steps will result in immediate increased demand.

Despite the efforts of the two biggest exporters, Saudi Arabia and Russia, there is still limited evidence that the cuts are significantly reducing the excess inventory. For instance, the United States reported a decrease in inventories of only 0.7 million barrels last week, which was less than expected.

In summary, the oil price surge can be attributed to export cuts by major oil-producing countries, slowing growth in developed economies, and weak demand in China. While China is trying to boost its economy through support measures, the impact on immediate demand remains uncertain. Furthermore, there are indications that the cuts made by Saudi Arabia and Russia may not be leading to substantial inventory drawdowns.

WTI crude oil is once again approaching the 77-resistance level, posing a challenge for WTI to sustain its momentum towards the next target of 79. Furthermore, on a weekly basis, the 200MA is acting as a barrier at the 77 mark.