Yesterday oil price hit the bottom low $50.90 (through the Fibo 61.8) then rebounded to Fibo 50 at price $ 53.24, to close at $ 52.90, up 3% from the opening price.
Many factors caused the price to plunge down since the beginning of the week, the recovery yesterday may be just a temporary correction.
Greece’s deadline was once again put off till this Sunday after Greek Financial Minister Euclid appeared in yesterday’s meeting with “empty hands”. Traders are questioning what the meaning of deadline to Greece? There’s still a chance for Greek debt crisis to create the gap on the oil market next week, despite slim.
China’s stock has lost 30% in July, regardless of the ultimate measures of the government. At least 1,323 companies have halted trading on mainland exchanges, freezing $2.6 trillion of shares, or about 40 percent of the market’s capitalization (Reuters). Bubble risks will threaten sluggish growth of China, causing oil demand to decline.
The oil price may decline due to speculative activity from large funds, while the number of net long position in WTI fell 8% last week; or hedging activitty oil producers.
Oil prices may return to test the bottom at $50.57.
However, the last rebound also made investors wonder whether oil prices are drawing a new sideway area.
Reuters predicts US crude inventories of June 3rd will fall by 700,000 barrels and American Petroleum Institute (API) estimated a decline of 960,000 barrels before official data released today. Crude oil can go up after US crude inventories from the EIA is published tonight.
Reuters analysts believe the market has over-reacted to the surg of oil rigs and crude oil inventories. According to James Crandell of Cowen & Co, the investment in the energy sector in the US this year will be reduced by 37% when oil prices plummeted, banks are tightening energy loans. Especially in the context of upcoming Fed rate hikes later this year, borrowing would be “expensive”, shrinking investment will lead to output slowdown.
According to Bernstein Research, China’s oil demand rose 7.3% in May , gasoline demand increased by 10% this year. Meanwhile, sales of SUVs increased by 50% and car sales rose 20%. It looks like gasoline demand of China has increased despite the weak economic indicators. “Bubble” in stock market may affect commercial oil demand but not the strategic storage demand. Prospects for demand from China is likely to support oil prices.
Iran talk was extended to this Friday, which may ease the oversupply pressure on market.
Oil prices could recover to $53.20.
Forecast: Oil prices may fall to 61.8 Fibo at $51.20, depending on US crude inventories that oil prices could break through or turning up.