By Bhavik Patel
Oil prices are on course for a moderate weekly gain after two consecutive weeks of losses. We saw a jump in oil prices on Thursday on back of news that refineries in China in the month of May showed strong demand. Retail sales from the US also increased which was positive news. We said last week also that institutional traders are looking at the consumption side only as over the past six weeks, institutional traders have reduced their positions in crude oil and fuels by 238 million barrels according to Reuters, which was one of the lowest weekly positions in those contracts since 2013.
Another reason for the increase in crude oil demand is the recent heatwave going on around the world. Heatwaves this summer in the US and Europe could lead to a surge in fossil fuel use as many countries worldwide continue to rely on oil, gas, and coal to meet their demand peaks. The Philippines and other South and Southeast Asia countries experienced heatwaves in April and May, with temperatures rising to over 45°C, driving up the energy demand.
Crude Oil technical levels
Crude oil has immediate support at 5445 and then at 5300. Although it is not trading in the oversold region, there is positive divergence on RSI_14. Emergence of ‘bullish engulfing’ candlestick pattern yesterday does confirm some emergence of buyers at lower levels and the pattern’s positive trend could negate if price closes below its low i.e. at 5600. Risk/reward warrants taking long at some correction around 5700 with stoploss of 5550 and target of 6000.
(Bhavik Patelis a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult yourfinancialadvisor before investing.)