Brent oil, which rebounded from the strong support zone of 71.5-72 in the middle of the week, continues to regain lost positions. If there is no sudden collapse today, the price of oil will record its first monthly increase in 2023. The price growth by 4% in June is not significant, but even the fact of the increase can have a strong psychological effect on market participants.
Yesterday oil got a support from updated U.S. economic statistics. The GDP growth rate for the 1st quarter of 2023 was reviewed from 1.3% to 2%. Such a significant divergence between the indicator and preliminary estimates is a very rare phenomenon, and therefore the positive impact on market sentiment may continue for some time. The demonstration of the U.S. economy's strength confirms the sustainability of oil demand.
According to the U.S. Energy Information Administration, commercial crude oil and petroleum product inventories in OECD countries totaled about 2.8 billion barrels at the end of May. Thus, they remain 35 million barrels below the 10-year average for this time of year. Since late May, there have been no significant hikes in oil prices, and U.S. inventories have remained almost unchanged. This indicates a stabilization of the market.
In recent months the deficit has decreased significantly, but in the near future the depletion of stocks may start again. Analysts expect production cuts by Saudi Arabia and its OPEC+ allies, as well as a decline in the number of U.S. drilling units. This will probably lead to a new decline in oil reserves in the second half of 2023 and in 2024.
The Brent oil chart indicates the next growth target at the level of 75.5. If successful, prices may return to last week's highs slightly above 77, but that will probably happen during the first trading sessions of July.
The following trading strategy option can be suggested:
Buy Brent oil at the current price. Take profit – 75.5. Stop loss – 73.7.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
