Crude prices drifted lower overnight. A combination of easing geopolitical tensions together with plentiful supply continues to weigh on sentiment. OPEC+ has contributed to the supply side of the equation as it continues to unwind previous production cuts at a faster-than-expected rate.
Meanwhile, there’s uncertainty over the outlook for demand growth. This has been declining significantly in China as its economy continues to struggle from its property bust. While its recent GDP release suggested that the country is growing robustly, few Western economists take Chinese government-compiled statistics that seriously.
Despite some recent attempts to trigger a significant rally, the lack of upside momentum and underlying demand concerns have kept oil rangebound for the past month. The spike up in crude prices following first Israel’s, and then the US’s, airstrikes on Iran’s nuclear facilities reversed as soon as President Trump ordered a ceasefire.
If an event that shocking was still not significant enough to push, and then hold, front-month WTI above $70 per barrel, then the current fundamentals don’t appear to support higher oil prices. The daily MACDs for both Brent and WTI have fallen back to neutral levels, suggesting that prices could continue to consolidate for now.
Source: TradingView
Yet it’s worth noting that oil prices are significantly above their lows from early May when front-month WTI dipped below $59 per barrel to trade back towards levels seen in February 2021.
For now, and in the absence of fresh drivers, there’s a fair chance that oil moves sideways, albeit with a slight negative bias.
