Anticipation of robust summer driving demand and worries over oil supply issues propel the price of crude Oil.
USOIL chart
US oil has risen to approximately $83.60 per barrel due to concerns over Middle East tensions and increased summer fuel demand. Traders are taking long positions amid worries that conflict between Israel and Hezbollah in Lebanon could disrupt global oil supplies. Hurricane Beryl, a Category 4 storm in the Caribbean, also heightens concerns.
Strong summer-driving demand continues to support prices, with recent EIA data showing peak production and demand for petroleum products in April. However, the possibility of sustained high US interest rates may limit oil price gains, slow economic growth, and reduce oil demand.
Conversely, persistent high interest rates in the United States could exert downward pressure on Oil prices by potentially slowing economic growth and dampening oil demand. San Francisco Fed President Mary Daly recently commented that while current monetary policy is effective, the timing for interest rate cuts remains uncertain. Daly emphasised, “If inflation remains stubborn or declines slowly, interest rates may need to remain elevated for an extended period.”
From a technical perspective, Oil is moving in a bullish market structure, forming higher highs and lows. With the market structure as confirmation, it is best to seek long positions as they will increase the probability. However, the current price position is not suitable for entry as it is too high. Taking a long position here will require a considerable stop loss and a small take profit, resulting in a bad risk-reward ratio.
Exercising patience and waiting for the price to retrace towards the 50% or 61.8% region of the Fibonacci is a prudent strategy. This approach, coupled with trend line support, offers a potential for a reversal and a profitable long-term position, encouraging and motivating the audience about the potential for profit in the long-term position.
