The upcoming seminar of oil industry CEOs and OPEC ministers on July 5-6 will set the stage for bullish messaging from Saudi Arabia and other oil producers. OPEC, along with its allies in the OPEC+ alliance, including Saudi Arabia and Russia, controls over 40% of the global oil supply. Bloomberg, Reuters, and the Wall Street Journal will not be allowed to cover the event, as OPEC aims to control the narrative.
Analysts anticipate updates on Saudi Arabia’s production plans during the seminar, as well as the pricing strategy of Saudi Aramco for August. These indicators will provide insights into the demand situation and potential competition with Russian prices.
The second half of the year holds promise for oil bulls, with expectations of significant production cuts by Saudi Arabia. Brent crude is projected to surpass $80 per barrel, while U.S. West Texas Intermediate could reach at least $75 per barrel.
In the first half of the year, oil bulls faced disappointments due to concerns over rising interest rates, economic slowdown predictions by Federal Reserve officials, bank failures, weakened Chinese oil demand, and challenges in limiting oil from sanctioned countries like Russia and Iran.
China is expected to release around 10 million barrels of oil imported from Iran and Venezuela, which had been held at ports for weeks under increased scrutiny.
However, some analysts, like Phil Flynn from the Price Futures Group, believe the second half of the year could bring a different narrative for crude oil. They foresee a potential shift from supply surplus to a significant deficit.
The Federal Reserve is closely monitoring various aspects of the economy, including the labor market, energy-induced inflation, and more, to determine interest rates at its meeting on July 26. The GDP growth rate for the first quarter was reported at 2%, higher than economists’ expectations of 1.4%. This indicates a relatively positive outcome for the Fed’s efforts to achieve a soft landing for the economy.
Despite the positive GDP result, concerns about inflation persist. The Personal Consumption Expenditures (PCE) Index grew by 3.8% in the year up to May, slightly below the key threshold of 4%. The Fed’s target for inflation is 2% per annum, and they have already raised interest rates by 5% since the end of the COVID-19 outbreak to curb inflation.
The technical outlook for WTI oil suggests that moving towards the 100-day SMA of $73.90 could provide strong upward momentum. Further gains could be achieved by reaching the 200-day SMA and the 50-week EMA. On the other hand, a decline towards the 200-week SMA could lead to a correction and test the major support at the 100-month SMA.
Gold prices showed a gain of about 5% for the first half of the year, but concerns about more rate hikes by the Federal Reserve are putting pressure on the $1,900 support level. The spot price of gold settled at $1,919.62, while the front-month August gold contract settled at $1,921 per ounce. The market is closely watching inflation indicators, such as the PCE Index, to determine the Fed’s interest rate decisions.
The price outlook for gold indicates a bearish trend, with the potential to reach lower levels. The mid-term outlook remains negative, and sustainability below the 5-week EMA could lead to a retest of the recent lows. A recovery above key resistance levels is necessary to reverse the bearish correction.
Natural gas prices experienced a decline of nearly 40% in the first half of the year. However, with increased cooling demand driven by summer heat, traders are more optimistic about.
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