Oil and week ahead!
The result was exactly how we were expecting for the Iranian presidential election. Iran's new presidential election has finally come to an end-as expected by the market; hardliner Ebrahim Raisi won an overwhelming victory with 62% of the vote. However, as the U.S. officials mentioned, foreign policies in Iran planing by Regim and not the president, so we are not expecting any specific changes in the ongoing Iran nuclear deal negotiations in Vienna. However, some markets accepted it as a negative sign, and it helped the market sentiment raise the prices.
In the long term, there are many different ideas and sometimes even contradictory. The optimist (Goldman Sachs) believes that the current global crude oil market faces a supply and demand gap of nearly 3 million barrels per day (the most severe supply and demand gap since last summer). Beginning large-scale lifting of the blockade measures), global oil market demand is expected to reach 99 million barrels per day in August. In the case of an extreme supply in short supply, some institutions said that as long as the $67 support level is not effectively broken, there is still room for oil prices to rise further.
On the other hand, thanks to global vaccination progress, we expect more ease in lockdowns and raise the summer travels.
"Oil's underlying physical demand picture remains positive," said OANDA analyst Jeffrey Halley. "Despite the noise in financial markets, the real world is on the right track and will require increasing amounts of energy as it reopens."
In response to higher expected demand, U.S. rig count, an early indicator of future oil output, according to Friday's published data from energy services firm Baker Hughes Co, rose to 373, its highest since April 2020.
On the other hand, as the Federal Reserve unexpectedly released hawkish signals and the central bank officials said they would start discussions on reducing asset purchases, market participants estimate that a stronger U.S. dollar may pressure oil prices. In any case, some investment bank analysts believe that the U.S. inflationary pressure is expected to be relieved in the fall as the supply bottleneck is lifted and labor supply improves, which is the main comment of FED as well. However, this estimate will make "the normalization of Fed policy become difficult to determine," and the dollar's bulls may be restrained.
In teh week ahead and terms of economic data, the market will focus on PCE inflation numbers. After the CPI soared to 5% earlier, the market expects that this PCE data will rise further from 2.5% in the previous quarter; according to the latest economic outlook published by the Federal Reserve, PCE inflation is expected to reach 3.4% this year. If the data is vital, it will further consolidate market expectations for the Fed to tighten its policy ahead of schedule. This can be the negative signal for Stock markets, as well as Oil demand.
WTI Technical review:
In the H4 chart, we have some signs of weakening the uptrend. RSI is falling back under 55, and the price moved lower than the OBV trend line. However, despite breaching the trend line in the chart, it is still above both M.A. lines. So mixed signal will be there, as long as Oil can breathe above $72 or breach under 71.40 and then first support at $70.
