Downside target for WTI crude yet to be met

As indicated in the previous forecast, oil prices are heading towards closing the gap formed at the beginning of April following the OPEC+ news. The Brent oil is already quite close to the target of $80 per barrel, but the WTI price has a more significant potential. In order to close the gap at the level of 75.7 the price needs to decrease by about 1.5%. That is why it is better to play on the drop in oil prices, trading American oil.

The price of oil continues to decline amid worsening economic data and increasing fears of recession in the U.S. and other Western countries. By the present moment, the weekly oil decline has reached 6%. The market will monitor whether demand for gasoline increases in the U.S. ahead of the summer season, and whether demand for oil in China grows.

The number of jobless claims in America rose last week. This indicates a possible slowdown in the U.S. labor market, caused by multiple interest rate hikes by the Federal Reserve. This adds to market participants' fears about declining fuel demand.

China's oil consumption is growing, but this is not leading to a reduction in fuel stockpiles. Chinese refineries reached a record output of 15.11 million barrels per day in March. At the same time, the volume of import and domestic oil production were 16.67 million barrels per day.

Thus, the growth of crude oil reserves in China for March amounted to 1.56 million barrels per day. In the first two months of 2023, the surplus was only 270 thousand barrels. Optimistic forecasts of oil consumption growth are due to economic recovery after the cancellation of zero-COVID policy. However, investors overlook the fact that China is building up its inventory now, which may reduce demand for raw materials in the future.

The sellers' target on the WTI oil market will be reaching the 75.7 mark, where it will be reasonable to take short positions.

Consider the following trading strategy: 

Sell WTI oil in the 77-77.5 range. Take profit – 75.7. Stop loss – 78.5.