Oil posts small gains as winds calm in Europe

• Oil breaks the key level of $75.27 and advances to a new five-day high.
• Most investors are in wait mode ahead of Wednesday’s CPI and US Fed decision.
• The US Dollar Index is trading above 105.00 after the European elections showed an advance by far-right parties.

Oil prices change course with the US session underway in May, with the benchmark West Texas Intermediate (WTI) trading in the green, as the dust settles on the European Union elections that saw a advance by the parties of extreme right. Although centrist parties maintained their position, the far right gained presence in Parliament, making it more likely that coalition talks would stall, delaying reforms and decision-making on economic development that would boost oil demand. Aside from the EU elections, investors are remaining cautious ahead of Wednesday, when the US CPI report will be released and the US Federal Reserve will likely give more clues about the timing of the first rate cut. interest rates.

Meanwhile, the US Dollar Index (DXY) is trading above 105.00 after rising on Friday driven by the stellar performance in the Non-Farm Payrolls numbers. Uncertainty stemming from the results of the European elections added fuel to the fire in favor of a higher US Dollar, but until Wednesday the Dollar is expected to trade sideways.

At the time of writing, crude oil (WTI) is trading at $76.00 and Brent crude is trading at $80.25.

Oil news and market factors: Demand will rise somewhere

• Saudi Aramco is reducing oil prices for July in Asian markets. A softer demand outlook in the region is the main driver of the cut, according to Bloomberg.
• Oil prices could decline further this week, according to Polymerupdate.com, with the supply and demand outlook from OPEC, EIA and IEA the main drivers along with the US Federal Reserve’s rate decision.
• The outlook for oil remains bullish, according to Goldman Sachs Head of Commodities Strategy Daan Struyven. Struyven sees Brent reaching $86 a barrel for the third quarter due to strong summer demand, Bloomberg reports.
• Iraq is close to reaching a final agreement with Kurdistan to restart oil exports.

Oil technical analysis: Don’t look too much into Monday’s rally

Oil prices are heading into the Fed’s rate decision in a depressed state following their nearly 10% drop last week (from last week’s high to last week’s low). With uncertainties on the horizon in Europe and sluggish demand in the US – where the Fed could keep rates stable for longer – all eyes turn to Asia. This triggers oversupply from the Middle East into the region with price cuts, as seen in Saudi Aramco.

Looking up, the crucial level near $75.27 needs to be firmly reclaimed first before targeting the key 100-day and 200-day simple moving averages (SMA) at $79.14 and $79.33, respectively. Next, the 55-day SMA at $80.44 is a level with a lot of resistance where any recovery rally could stall. Once surpassed, the path seems quite open to head to $87.12.

The $76.00 marker continues to act as resistance with the $75.27 level playing a crucial role if traders still want to have an option to return to $80.00. However, risks are tilted towards another drop if sluggish summer demand prevails and sends oil lower to $68.00, below $70.00.

US WTI Crude Oil: Daily Chart