International oil prices are experiencing a slight decline on Friday, but they are still on track for a fifth consecutive week of gains. This is mainly due to strong economic data from the United States, stimulus measures from China, and expectations of production cuts by OPEC+.
As of 16:22 Beijing time, NYMEX crude oil futures dropped by 0.30% to $79.86 per barrel, while ICE Brent crude futures fell by 0.37% to $83.47 per barrel. Despite the dip, both prices have risen nearly 4% this week.
The increase in oil prices on Thursday was driven by the release of data showing that the US economy grew faster than expected in the second quarter. Additionally, China’s announcement of further stimulus measures alleviated concerns about a global economic slowdown.
The US Commerce Department reported that the country’s gross domestic product (GDP) increased by 2.4% in the second quarter, surpassing market expectations of 1.8%. This supports the belief of Federal Reserve Chairman Jerome Powell that the economy can achieve a “soft landing.”
Baden Moore, the director of commodities at National Australia Bank, predicts that oil prices will continue to rise in the third quarter of 2023. He expects prices to remain above $90 per barrel until OPEC or Saudi Arabia ease their voluntary production cuts.
Market attention is now focused on the upcoming meeting of the market monitoring committee of OPEC+ on August 4. It is anticipated that the committee may announce an extension of voluntary production cuts. However, concerns are arising due to recent interest rate hikes by global central banks in an effort to combat inflation and the potential impact on long-term demand. The Federal Reserve raised interest rates by 25 basis points on Wednesday, and the European Central Bank followed suit on Thursday.
Jun Rong Yeap, a market strategist at IG in Singapore, acknowledges the positive economic data, which validates hopes for a soft landing and a brighter outlook for oil demand. However, he also highlights that oil prices are facing challenges due to broader pressure from the risk environment.
Data earlier this week revealed that US crude stockpiles fell less than expected. Jim Ritterbusch, the president of Ritterbusch and Associates LLC, noted that there hasn’t been a significant impact from increased product demand, especially in distillates, which have driven most of the recent upward momentum.
Looking at the technical analysis, NYMEX crude oil has initiated an upward wave III trend from $73.78. The upper resistance is set at the 76.4% target of $81.63 and the 85.4% target of $82.56. On the hourly chart, oil prices have also started an upward trend from $74.52, with the upper resistance at the 238.2% target of $81.88. These upward trends are considered subwaves of wave III.
Despite the slight retreat in oil prices, the market remains optimistic about their continuous rise. Factors such as strong economic data, Chinese stimulus, and the possibility of production cuts by OPEC+ are expected to sustain the upward trajectory in oil prices. However, concerns about interest rate hikes and long-term demand still linger, and further clarity may arise after the next OPEC+ meeting on August 4.